3/12/1980 - Laserfiche WebLink

Home Browse Search

MAR 121980 ooic 42 PACE 9- . IF YOU WERE GOING TO SELL NOTES, 11.207% IS A FAIR RATE IN A SITUATION WHERE YOU HAVE 15-16% TREASURY BILLS AND 177 PRIME RATE. HE STATED THAT THEY DID HAVE SOME NOTES FOR TALLAHASSEE AT AROUND 8.90, BUT THEY WERE MIG 1, THE BEST RATED BOND FOR THE CAPITOL OF FLORIDA. MR. HOUGH EXPLAINED THAT THE REASON FOR THE RATING FOR THE INDIAN RIVER COUNTY BONDS GETS BACK TO THE RELATIVELY MINIMAL MARKETABILITY FOR A RACETRACK SECURED BOND SINCE ONLY A FEW MAJOR INSTITUTIONS WILL BUY THEM. HE FURTHER NOTED THAT THE CHICAGO PARK BOARD YESTERDAY SOLD SOME MIG 1 RATED NOTES AT 10-3/4% SO THERE IS A WIDE VARIATION OF INTEREST RATES THAT CAN BE APPLIED TO THE SAME QUALITY. COMMISSIONER WODTKE NOTED THAT THESE ARE TAX FREE NOTES, AND MR. HOUGH INFORMED HIM THAT MUNICIPAL BONDS AND MUNICIPAL NOTES GENERALLY SELL AT ABOUT 2/3 OF THE INTEREST RATE AT WHICH A TAXABLE SECURITY OF SIMILAR QUALITY SELLS. HE FELT, RELATIVELY SPEAKING, YOU COULD GET A MORE FAVORABLE BOND SALE THAN A NOTE SALE, BUT NOTED THAT IF YOU SELL THE NOTES, YOU HAVE THE OPPORTUNITY TO REFINANCE THEM WITHIN THE NEXT THREE YEARS; WHILE IF WE SHOULD GET A DECLINE IN INTEREST RATES, YOU THEN WOULD BE ABLE TO REFINANCE* AND SELL YOUR BONDS AT A LOWER INTEREST RATE. COORDINATOR THOMAS NOTED THERE ARE OTHER FACTORS THAT CAN EFFECT A DROP IN INTEREST RATES. MR. HOUGH STATED THAT UNFORTUNATELY WE ARE IN A CRISIS SITUATION WITH NO WAY TO PREDICT; MOST PEOPLE IN BANKING NEVER EXPECTED THE PRIME RATE TO COME TO 17%. HE CONTINUED THAT HE WOULD GUESS THAT AFTER A PERIOD OF TIME, YOU WILL HAVE LOWER INTEREST RATES, BUT UNLESS THE GOVERNMENT AND OTHER SUPPLY AND DEMAND FACTORS WORK, MAYBE IT WILL GO TO 20-25%. HE NOTED THAT IN SOME OTHER COUNTRIES, NAMELY ARGENTINA, IT HAS GONE AS HIGH AS 60%. CHAIRMAN SIEBERT COMMENTED THAT IF WE SHARE THAT FEELING, WE GO BY WAY OF THE NOTES; IF WE DON T WE GO BY BONDS. DISCUSSION ENSUED IN REGARD TO THE COST OF itDEFEASING" BONDS.