Detroit Bonds Are Hot Item On Wall Street

August 6, 2013

A funny thing happened on Detroit’s way to filing for Chapter Nine bankruptcy protection… The city’s bonds have become some of the hottest on Wall Street. So much so that hedge funds cannot find enough of the bonds available to satisfy the demand.

These are some of the same bonds that are part of Detroit’s roughly $18 billion of long-term debt. But financial experts say hedge fund managers are betting that Detroit’s bonds – many of them backed by insurance firms – will turn out to be quite lucrative in the long run. WDET’s Quinn Klinefelter talked about the push to buy up Detroit’s bonds with veteran hedge fund manager and consultant Andrew Schneider.

One additional note, with Detroit’s pension obligations being one of the centers of concern in the ongoing bankruptcy proceedings… In 2005 Detroit took the unusual step of issuing about $1.5 billion worth of bonds to European banks to help fund the city’s pensions. Those bonds are now some of the most sought after by hedge funds…