Collapse likely makes borrowing tougher
The recent turmoil in financial markets will complicate the task of borrowing tens of millions of dollars to build the Broad Street Parkway, and may increase the cost of getting the loan, says an investment manager. But things could be a lot worse. "The cost of issuance has gone up in the municipal bond market . . . We have certainly been impacted - and our yields have gone up a little bit - but we have not been impacted as much as other states," said Mike Cerato, managing director of The Cerato Group of Wachovia Securities Financial Network, an independent financial firm in downtown Nashua. Cerato said supply and demand was the reason. "A lot of supply has recently hit the muni (municipal bond) market, but fortunately the state of New Hampshire does not issue a lot of bonds relative to other states . . . so our prices have not changed as much because demand is still pretty high for New Hampshire paper," he said. According to Cerato, municipal bonds - long-term debt borrowed by government agencies to pay for big projects - have been hurt because some large, institutional investors have been selling them off to raise cash to cover losses in other areas, such as the mortgage and treasury markets. This has flooded the market with munis, meaning yields have gone up, forcing cities to pay higher interest rates to stand out in the market and attract investors. While this is bad for municipalities, it is good for investors, Cerato said. "This excess supply on a national scale has created a unique situation. Some municipal bonds actually offer higher yields than the corresponding U.S. Treasuries. That is almost unheard of," he said.