The mood of bond buyers offers a pretty clear measurement of a government entity's prospects for the future. If investors believe a given government has its fiscal house in order and a solid economic future, they'll snap up debt — essentially lending it money — as a sound and safe investment.
Well, shockingly, investors have gone skittish about L.A. Can you blame them?
We have a call in with Brill. (Her voice mail greeting offers instructions for people whose dog has gone missing, a fun oddity requiring no further comment.)
The city was selling short-term notes, as it does routinely, borrowing money to pay bills until expected tax revenue comes in. (They're called “tax and revenue anticipation notes,” or TRANs.)
“This is the most I've ever talked to investors” about a sale like this, Brill told the Times.
The reluctance led to higher yields, meaning our borrowing costs have risen.
As the Times explains, the lenders, who are typically money market mutual funds, don't want their own investors getting jumpy if L.A. faces some fiscal shock and a resulting spate of bad headlines.
Perhaps this should serve as a wake-up call to policymakers and elected officials to make some tough choices and lay out a fiscal framework that would put investors (and the rest of us) at ease.
Nah. Just keep going to photo-ops and kick the fiscal can down the road.