Illinois Pays More Than Mexico as Cash-Strapped States Sell Bonds Overseas

What Illinois pays isn't the most interesting part of this article... it's the description of the Build America Bonds program:

To make it cheaper for localities to borrow, the Treasury pays 35 percent of the interest cost of Build Americas, whose 30-year yields were about 1.4 percentage points higher than top- rated tax-exempt bonds yesterday, according to Wells Fargo & Co. and Municipal Market Advisors indexes. Build America interest payments are subject to federal taxes, unlike traditional municipals, whose tax-exempt yields aren’t a lure for investors abroad.

Because it's not attractive compared to traditional, tax-exempt municipals, it's not a big sell for Americans and domestic interests. Yet it's subsidied to the tune of 35%, so that combined with the tax status makes it attractive to foreigners who desperately need new places to park their dollars. I also suspect there is an explicit (or at least implicit) default guarantee involved, or some role in ownership of the assets in the case of default (probably a transformation to equity, which would evolve into a foreign privatization/selloff off the assets).