Massachusetts and New Mexico made news three years ago when they issued bonds for construction projects and promised to repay the loans with federal highway grants they had coming their way. Now, Chicago has come to market with a variation on the grant-anticipation theme.

In a first-of-its-kind in the municipal market, the Chicago Housing Authority issued a $298 million revenue bond this November backed solely by future federal housing grants.

The money will go toward a $1.6 billion fund to rebuild the city's public housing stock. While the housing grant deal is similar to previous grant-anticipation bonds based on highway monies, it had its own hurdles to climb. Congressional appropriations for housing and transportation work differently, and Chicago had to get the Department of Housing and Urban Development to sign off on a series of guarantees of a stream of capital for 10 years. This guarantee reassured investors that their risk was limited to whether Congress continues to approve public housing aid. Wall Street considered the peril minimal, given Congress' long his-tory of support for public housing. HUD also agreed to forward the payments semiannually to cover debt service directly.

The deal won high approval ratings: an AA from Standard & Poor's, an AA- from Fitch and an Aa3 from Moody's Investors Service. Given its success in the market this fall, the bond is likely to become a model for future financings by other public housing agencies.