Since the Sept. 15 collapse of Lehman Brothers, the $2.6 trillion market for state and city bonds has been virtually frozen - partly because investors are scared to own anything more dangerous than Treasuries, and partly because interest rates that cities must pay to lure buyers have shot up 25% or more. As a result, some $15 billion worth of projects have been temporarily shelved in the past three weeks, according to the consultancy Municipal Market Advisors. Broward County, Fla., pushed back plans to borrow $170 million for new sewer and water lines. But there are also promising signs that the broader market for municipal bonds is starting to thaw. On Oct. 7, Kentucky sold $400 million worth of bonds to finance education and public works projects around the state. Bolstered by how the Kentucky issue went, Ohio followed with a $240 million offering of its own that afternoon. "While the floodgates won't necessarily open, things aren't quite as dire as people have thought," says Scott Pattison, executive director of the National Association of State Budget Officers. (Excerpts from Time.com - 10/10/08)
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