Demand is high in bond sale
California wrapped up a sale of $3.5 billion in tax-free bonds Thursday after trimming yields slightly from initial expectations as investors bid aggressively for the debt.
Still, taxpayers will foot significantly higher interest costs than they did in the last general-obligation bond offering.
Muni yields nationwide tumbled from July through September. But yields got so low by late September that investors suddenly went on a buyer’s strike. As a spate of new bond offerings hit the market early in October, issuers were forced to jack up yields.
California got caught in that market push-back as it tried to sell $4.5 billion in bonds Oct. 8, when it had to boost yields.
In this week’s sale -- a refinancing of so-called economic recovery bonds -- the state agreed to even higher yields than it paid in the Oct. 8 deal.
One example: The 13-year bond in this deal will pay an annualized tax-free yield of 4.85%, compared with 4.47% in the previous bond sale.
But the healthy demand, particularly from individuals, allowed the state to trim yields from the initial estimates Tuesday. The state had expected to pay as much as 5% on the 13-year bond, for instance.
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