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Published on: 5/20/2008
Last Visited: 5/21/2008
Tom Spalding, senior investment officer at Nuveen Investments in Chicago, said the decision validates the heftier price tag investors pay for specialty states, and should allow them to continue to outperform the national market now that a cloud of uncertainty is gone.
"Now the specialty state market will go along just like it was ... the New Yorks and New Jerseys, and North Carolinas will command a premium price in the market place," he explained.Typically, specialty paper from high-taxed states, such as New York and New Jersey, trades 10 to 15 basis points higher in price than non-specialty state paper, according to Spalding.
Demand for these bonds weakened in recent months as investors awaited the outcome of the case, according to Spalding, who added that trading should resume its normally healthy pace.
Had the decision favored the Davises, "we would have changed the matrix on how we traded" specialty and non-specialty states."Bonds in states that have out-traded the national market would have given ground and we would have had some new spread relationships that we have never seen before," he explained.