Bonds from Harvard University, MIT, and Princeton University were the best performers among US investment-grade bonds in the month of August.
These institutions, whose bonds traded for more than 120 cents on the dollar, saw at least a 9 percent rise in value during August, according to Bank of America Merrill Lynch index data. MIT’s 100 year bonds made the greatest gains, rising from 104 cents in July to 121.9 cents on the dollar on Aug. 26.
Some attribute this rise—which follows Standard & Poor’s downgrade of US Treasury bonds from AAA to AA+ in early August—to the financial stability of major universities, such as Harvard, which have maintained a AAA rating from both Standard & Poor’s and Moody’s Investors Service.
By comparison, the U.S. Treasuries gained only 2.8 percent in August.
“Risk aversion, a flight to quality and also with S&P downgrading Treasuries to AA+, I think it’s enhanced the bid for AAA securities because there aren’t that many left,” James Lee, a senior analyst at Calvert Investments, told Bloomberg News.
Harvard’s 6.5 percent bonds maturing this year rose 9.8 percent to 136.4 cents on the dollar, according to Bank of America Merrill Lynch index data.
University President Drew G. Faust has said that Harvard would ween itself off of borrowing, a method it had in recent years used to finance new building construction.
During the 2008 financial crisis, Harvard sold $2.5 billion in bonds, and issued debt as recently as November 2010, when the University sold $601 million in bonds.
In June, Harvard bought back $300 million of the 2008 bonds, hoping a smaller debt load would allow the University more flexibility to make new investments, according to Bloomberg.
—Staff writer Tara W. Merrigan can be reached at tmerrigan@college.harvard.edu. —Staff writer Zoe A. Y. Weinberg can be reached at zoe.weinberg@college.harvard.edu.
Read more in News
Jill Abramson Takes Top Post at New York TimesRecommended Articles
-
GSD Honors Eminent GraduateBy JOSE A. DELREAL
-
Harvard Name Aids Debt SalesThe cachet of the Harvard brand name came into play on the bond market when the University sold $480 million of debt last week and beat benchmark interest rates—an indication that the University’s bonds remain in high demand despite Harvard’s budgetary troubles.
-
Congress Eyes Tax ExemptionsA new report from the Congressional Budget Office questioned universities’ issuance of tax-exempt bonds, a method Harvard has employed to raise cash over the past years.
-
University Bond Sale Raises Less Than ExpectedHarvard’s $601 million bond sale on Tuesday raised 20 percent less than had been planned earlier, as rising interest rates led to a decision to shrink the size of the deal.
-
Harvard To Buy Back $300 Million of BondsHarvard plans to buy back $300 million of bonds that it sold during the financial crisis, since a reduction in debt would allow the University more flexibility to make new investments, according to Bloomberg.
-
With AAA Rating, Cambridge ThrivesThe city is one of 27 municipalities nationwide to earn AAA ratings—the highest ranking possible—from all three major U.S. creditors.
