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Old 01-07-2011, 01:29 PM
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Mary Pat Campbell
Join Date: Nov 2003
Location: NY
Studying for duolingo and coursera
Favorite beer: Murphy's Irish Stout
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As Illinois lawmakers huddle behind closed doors this week trying to find ways to plug the state’s $13 billion deficit, municipal-bond investors are sizing up how to wager amid the state’s woes.

The state’s bonds have the highest spreads — a measure of the perceived risk of default — of any state, according to Thomson Reuters data. Meanwhile, the cost of insuring against the bonds’ default keeps rising. Many muni-bond investors are avoiding Illinois even as they buy bonds of other cities and states. Others believe the state may prove a good bet, either because it will get its financial act together or be aided by the federal government.

Illinois is striking fear in bond buyers’ hearts, they say, because, more than many other financially troubled governments, the state has increasingly relied on debt to pay bills, rather than making deep spending cuts or raising income taxes to increase revenue.

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