“Bonds sold to finance Florida housing developments are being issued at the fastest rate in six years as investors seek extra yield from the municipal debt even as 85 percent of such securities have defaulted since 2008.
Known as dirt bonds, the borrowings are sold by districts set up by builders to finance roads and utility lines on raw land for housing. Jurisdictions in Florida have sold $273 million of the debt this year in 25 issues, on pace for the most since 2007 in terms of dollar amount and number of issues, data compiled by Bloomberg show.
The securities are benefitting from home prices in Florida that rose at the end of 2012 to a 21-month high, data from the Federal Housing Finance Agency show. At the same time, investors are hunting for speculative-grade munis, which have earned 3.1 percent this year, compared with 1.5 percent for the broader local market, Barclays Plc data show.
The jump in issuance shows “that many of those housing markets have stabilized,” said Peter Hayes, head of munis at New York-based BlackRock Inc. He oversees $114 billion of local debt, including land-development obligations.
“That helps dirt bonds, along with the fact that they offer more income and more yield than some other sectors,” he said.
