Nov. 23 (Bloomberg) -- Georgia, the most populous U.S. state with top grades from the three major credit-rating firms, sought to take advantage of lower borrowing costs, boosting its bond sale by 11 percent in the week’s largest tax-exempt offering.

The state sold $603.5 million of general obligation bonds, with yields ranging from 2.12 percent on debt due in 2016 to 3.15 percent on bonds with a 2022 maturity.

Georgia expanded its offering from $541.5 million to achieve additional debt service savings, Susan Hart Ridley, director of the state’s Financing and Investment Division, said in an interview. Citigroup Inc., which submitted an interest cost of about 2.86 percent, was the winning bidder among eight vying to underwrite the bonds. “I thought that was a good response,” Ridley said of the number of firms.

Benchmark state and local government bonds were little changed today, based on a daily survey by Municipal Market Advisors of Concord, Massachusetts. The independent research firm’s index of 10-year yields held steady at 3.05 percent, the lowest since Oct. 7.

New York state sold $349.3 million of general obligation bonds in today’s second-largest competitively bid offering. Debt maturities ranged from 2010 through 2030 and not all the yields were immediately disclosed.

JPMorgan Chase & Co. bought the offering at an overall interest cost of 2.93 percent, beating out seven other banks, State Comptroller Thomas DiNapoli said in a news release.

Yield Gaps

New York bonds due in 2021 will pay 3.5 percent, 39 basis points more than the yield on comparable-maturity debt from Georgia. A basis point is 0.01 percentage point. The yield difference between the states’ securities was 23 basis points at the 2016 maturity.

New York is rated AA by Standard & Poor’s and AA- by Fitch Ratings, the third- and fourth-highest of 10 investment grades. Moody’s Investors Service said last week that the state’s Aa3 rating, comparable to AA-, might fall if spending cuts aren’t part of plans to close a $3.2 billion budget deficit.

The state, whose tax-supported debt burden is second only to California in the municipal market, will use the proceeds to refinance bonds with variable rates.

Georgia saved about $36 million off payments on its AAA fixed-rate debt through today’s refinancing, Ridley said.

To contact the reporters on this story: Jeremy R. Cooke in New York at jcooke8@bloomberg.net; Michael McDonald in Boston at mmcdonald10@bloomberg.net.

Last Updated: November 23, 2009 16:44 EST