Chicago Bonds Lose Ground as Quinn’s Deadline Nears on Pensions

Chicago’s bonds are trailing the municipal market, a sign that investors are leery about the city’s finances as Illinois Governor Pat Quinn decides today whether to sign a bill fixing the metropolis’s pensions.

The most-traded Chicago general-obligation bonds during the past week are taxable securities that were issued in March and mature in 30 years, data compiled by Bloomberg show. The debt changed hands June 6 at a yield of 5.71 percent, or 2.3 percentage points above benchmark Treasuries. That was the widest spread since May 19.

Quinn, a Democrat, today must either sign or veto a bill that would cut benefits and require employees in the third-most-populous U.S. city to pay more for their retirement. Mayor Rahm Emanuel, also a Democrat, obtained the legislature’s approval on April 8 to rescue two sinking pension funds. Quinn has signaled that he’s hesitant to sign the measure because it could raise city property taxes.

The $3.7 trillion municipal market retreated last week. Benchmark yields rose about 0.08 percentage point to 2.33 percent, for the steepest increase since February, Bloomberg data show. Interest rates touched a one-year low of 2.24 percent on June 2.

This year’s decline in yields has propelled demand for riskier debt, such as Chicago general obligations, which Moody’s Investors Service rates Baa1, three steps above junk. Standard & Poor’s grades the securities A+.

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