North Carolina's treasurer has been given the green light to sell up to $450 million in new bonds.
The proceeds will not be used to build roads or schools, but to pay off other outstanding state debt.
Bonds are like a home mortgage. Someone loans you the money upfront and you pay them back overtime with interest. Just how much is often determined by the prevailing interest rate at the time of the sale.
And, like a mortgage, if you pay the principal back early, you save money by avoiding some of the interest owed.
This is what North Carolina Treasurer Dale Folwell is trying to take advantage of.
“When interest rates decline, many decide to refinance the mortgage on their house," Folwell said in a statement. "The state is taking this opportunity to do the same,”
The Fed is expected to raise interest rates at some point this year. But just when is still a question. By selling these bonds sometime in July and using the proceeds to pay off other bonds early, Folwell says the state could save more than $50 million.
