State sells $700 million in bonds at record low rates

The Board of Public Works approved a bond sale Wednesday.

The Board of Public Works approved a bond sale Wednesday.

By Dana Amihere

The Board of Public Works approved the sale of more than $700 million in general obligation bonds Wednesday at historic low interest rates of about 2.16%.

Interest rates have been favorable in 2012 as March’s bond sale had the second lowest rates since the 1980s, deputy treasurer Susanne Brogan said.

Maryland’s maintenance of the highest possible bond rating by Moody’s Investors Service, Standard & Poor’s and Fitch’s Ratings was conducive to the competitive rates achieved in this bond sale.

“Today’s results were very satisfying,” Treasurer Nancy Kopp said. “Again, Maryland’s Triple AAA-rated bonds drew significant interest — and a very favorable and low interest rate.” She called it the “flight to quality” by investors.

“Maryland taxpayers benefit not only from saving millions of dollars because of the state’s low interest rates, but also from the investment in our infrastructure that these bond proceeds provide.”

Small, retail customers bought $26 million since Friday, before Wednesday’s bidding by institutional investors.

Bank of America-Merrill Lynch bought the lion’s share of both tax-exempt and taxable bonds at 2.2% and 0.4% interest, respectively. J.P. Morgan Securities bought about $190 million in refunding bonds which will allow the State to reduce the state’s debt service costs by an estimated $16 million by refinancing existing bonds at a lower rate.

Morgan Stanley and Co. won the bid for the remaining $15 million in qualified zone academy bonds with a 2.8% coupon 100% eligible for federal subsidy.

The Treasurer’s Office expects to hold another bond sale next February or March.

Here are more details about the sale.

As of June 30, Maryland had $7.5 billion in general obligation debt. Two of the rating agencies, Standard & Poor’s and Fitch, characterize this debt as “moderate” but as it has for several years, Moody’s Investor Services classifies Maryland debt as “high” relative to its 50-state medians.

Based on its state-debt medians, Moody’s July 18 report said Maryland ranks 18th for debt as a percent of personal income and 14th on a per capita basis.