Build America Bonds Program at work in Arizona

By
Mortgage and Lending with CNN Mortgage

The U.S. Department of Treasury has a program called the Build America Bonds program  which provides funding for state and local governments at lower borrowing costs for community projects projects such as construction of schools and hospitals, development of transportation infrastructure, and water and sewer upgrades.

This program improves the conditions for an economic recovery and address challenges facing state and local governments.  The Build America Bonds program will help states and local governments finance building.  The Build America Bonds program supports the construction of schools, hospitals, roads, and environmental projects, and helping communities build a foundation for a stronger economic future.

Under the program, the Treasury makes a direct payment to the state or local governmental issuer in an amount equal to 35 percent of the interest payment on the bond.  These bonds are designed to appeal to a broader set of investors than traditional tax-exempt bonds.  Potential investors include pension funds that traditionally do not hold tax exempt bonds and foreign investors.  These investors have been important additions to the market for municipal debt.

Early market reception for Build America Bonds has been very positive. Since the program was launched on April 3, 2009:

  • There has been $17.4 billion in Build America Bond issuance;
  • Build America Bonds constitute  about 16.6 percent of municipal bonds issuances since mid April; and
  • A total of 34 states are participating in the program, with a total of 178 separate issues.

Here's an update on the Build America Bonds in use in Arizona to date:

Arizona -- 6 issues as of 7/17/09 totaling $175 million

Issue Date

Issuer

Purpose

Amount ($Millions)

5/7/2009

Mesa Utility System

Multiple Utility Improvements

60

5/29/2009

Maricopa County School District No. 028 (Kyrene Elementary)

School Improvements

24

6/3/2009

Miaricopa County Union School District No. 097 (Deer Valley)

School Improvements

17

6/23/2009

Black Hawk County

Public Improvements

26

6/24/2009

Coconino & Yavapai Counties- Joint Union School District No. 9 Sedona

School Improvements

18

7/7/2009

City of Avondale

Public and Sewer Improvements

30

 

Interest Rates for July 31, 2009

MBS prices are up this morning and will result in improved pricing - about 0.125 better to rate than yesterday. 

Yesterday's 7-yr auction was successful, and MBS prices are seeing interest from fixed income investors as the rally continues.  Gross Domestic Product was released this morning and is contributing to this morning's price improvement.   The Dow is up 50 points. No more economic data will be released today.  Rate movement during the day may be subject to movement in the stock market.

Conforming Conventional 30Yr Fixed  5.375%

Conforming Conventional 15Yr Fixed  4.75%

Conforming Conventional 5/1 IO ARM 4.37%

FHA 30Yr Fixed 5.250%

* Above Conventional rate quotes are as of  7/31/09 on a Conventional $165,000 loan amount, primary residence at 80% loan to value, with a 720 FICO score.  APR includes $1,200 in lender fees and 980 in title charges (title charges may vary).  FHA Quote assumes a $125,000 loan amount and a 680 FICO score, and a 96.5% LTV. Documentation of income and assets required.  No origination or discount points.

  

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