New Jersey had no difficulty borrowing money Thursday, selling $2.25 billion in short-term notes one day after the state became the first to be sued for fraud by the U.S. Securities and Exchange Commission.
New Jersey settled the case — which centered on accusations that it had misled investors about the health of its two largest pension funds — without admitting or denying wrongdoing.
Dealers and investors looked beyond the case, reflecting the recent strong demand for tax-exempt securities that drove yields to near-record lows.
The funds will be used to help cover New Jersey’s cash flow requirements for the fiscal year to June 30, 2011.
New Jersey is benefiting from the massive demand for tax-exempt muni bonds at a time when new issuance has been falling.
Year-to-date tax-exempt sales are down some 19 percent on the year as states and municipalities have diverted issuance into taxable Build America Bonds, which provide a federal subsidy for the issuer.
The dearth in tax-exempt deals comes just as demand has ramped up from investors looking to offset a possible rise in taxes for wealthier households next year, should Congress decide against extending the Bush administration tax cuts. Slow economic growth and low inflation are also providing support.
“The state obtained an extremely favorable cost of borrowing on these notes,” said Andrew Pratt, a spokesman for Sidamon-Eristoff.
He interpreted that as “a welcome sign of confidence in the Christie administration’s ability to manage the state budget responsibly.”
The disclosure problems occurred before Republican Gov. Chris Christie took office.