President Donald Trump’s executive order suspending immigration has investors hedging their bets in a once deserted market: prison bonds.
Investors are scooping up bonds in prison facilities in Texas and Arizona, fueled by Trump’s hard-line stance on immigration, The Wall Street Journal reports.
The uptick in interest in prison bonds comes on the heels of Secretary of Homeland Security John Kelly’s statement last week instructing immigration enforcement officials to “take all necessary action and allocate all available resources to expand their detention capabilities and capacities at or near the border with Mexico.”
The president is firmly locked into and adamant about his tough stances on immigration. Trump made immigration policy a central part of his campaign; during the 2016 election cycle, Trump talked about the threat posed by “illegal immigrants” from Mexico and “radical Islamic terrorists.” Trump reiterated his position at the Conservative Action Political Conference Friday, telling the crowd to simply look at the attacks and unrest that swept through Europe last summer.
Coupled with Kelly’s comments, Trump’s unwavering toughness on immigration is causing wealthy investors to diversify in favor of prison bonds. One investor gobbled up $100,000 worth of Willacy County, Texas prison bonds last December for just $7,650, the Journal reports. That investor now stands to make a $60,000 profit if they choose to sell.
There is nearly $1.1 billion in outstanding prison and jail bond debt, according to available data. Some bond yields have jumped nearly 60 cents on the dollar since last December, offering willing investors some very attractive profit margins. Three facilities in Texas alone account for $140 million of the outstanding sum.
Prison operations contracts and presidential tenures are far shorter than the length of municipal bonds. Investors may not get a quick payout in the prison bond market.
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