Minnesota saw strong demand for nearly $800 million in general obligation and other bonds offered for competitive bids Tuesday, despite a credit downgrade last week from ratings agency Standard & Poor's.
That's good news for taxpayers, who foot the bill to pay off the state's debt.
Due to the low-interest environment, the state obtained an interest rate of 2.82 percent for $445 million in 20-year general obligation bonds.
The state did well, said Paul Rebholz with Wells Fargo's public finance division in Minneapolis.
"That's a phenomenal rate. Even though it's a busy week with a lot of other issuers in the market with bonds this week, the state still did very well," Rebholz said.
Last week, Standard & Poor's cut the state's credit rating by one notch from its AAA status. The firm criticized the state's failure to align its revenues and expenses over the long term. Fitch Ratings lowered the state's bond rating last July. Moody's Investors Service did so in 2003. Seven states still have triple A grades from all three ratings agencies; and seven still have the top grade from two of them.
"The bond sale went extremely well. The market is particularly favorable at the current time, so we are pleased with the bids we received," said Kristin Hanson, Assistant Commissioner for Treasury and Debt Management at Minnesota's Management and Budget Office, in a statement.
"They got a great bid," agreed Darci Doneff, managing director of fixed income services with Piper Jaffray in Minneapolis.
Minnesota goes to the bond market about once a year to ask investors to lend the state money for various capital construction projects. The state declined to refinance another $152 million in bonds, saying market conditions would have had adverse effects on that issue.
Jim Schowalter, commissioner of Minnesota's Management and Budget Office, said investors are competing for safe places to put their money, and that worked in the state's favor.
Schowalter doesn't know how much the downgrade will cost the state in higher interest expense. One local bond buyer pegged the amount at around $1.25 million, and Schowalter didn't dispute that. But that's not much in a $35 billion two-year budget.