Nuveen’s John Miller calls it “stunning” that MetPier’s rating can fall so far due to politics when its economics remain healthy.
The muni market can be quite slow moving — for example, Puerto Rico’s bonds have been falling pretty gradually for about two weeks since it declared a version of bankruptcy.
But muni investors are pretty swift to sell when there is a major downgrade — which happened with Illinois bonds Thursday.
The state’s general obligation bonds and Metropolitan Pier & Exposition bonds were both wider by approximately 25 basis points Thursday afternoon, estimates John Miller, who heads municipal bond investing at Nuveen Asset Management.
MetPier bonds were rated triple-A not that long ago, notes Miller. Plus, revenues (sales and tourism taxes) have actually increased the great majority of years. “Debt coverage is excellent,” he adds.
But since the MetPier revenues now essentially pass through the state budget, the bonds have to be downgraded when the state is.
Miller calls it “fairly stunning” to see what dysfunctional politics can do to a bond rating even when the finances of an issuer are healthy. “The economy is moving along and yet the politics are so bad that the bond went from triple-A to double-B-plus purely on politics,” he says.
Barron’s
By Amey Stone
June 1, 2017 2:21 p.m. ET