Detroit is paying a high price in its return to the $3.6 trillion municipal-bond market for the first time since emerging from a record bankruptcy, Bloomberg News reported yesterday. The $245 million of bonds, to be sold today through the Michigan Finance Authority, have the top claim on city income taxes to ensure investors are repaid. Even so, 14-year debt is being offered at an initial yield of 4.75 percent. That’s 2.1 percentage points more than top-rated securities. Detroit filed for bankruptcy protection two years ago to escape from debts it couldn’t afford after the population tumbled, tax collections slid and the automobile industry’s decline left the economy reeling. That allowed the city to cut $7 billion from its obligations by the time it emerged from bankruptcy in December, an effort to steady the government’s finances and hasten its revival.
