California Treasurer Sets $2.7 Billion Bond Sale in MarchMichael B. Marois
California will sell $2.7 billion of general-obligation debt in March, the first offering since Standard & Poor’s raised its rating on the most indebted state.
The offer will include $2.2 billion of tax-exempt bonds and $310 million that are subject to federal taxes, Treasurer Bill Lockyer said in a statement.
California’s general-obligation rating was raised by S&P for the fist time since 2006 in January. S&P’s one-step boost to A, sixth-highest, from A- followed tax increases championed by Democratic Governor Jerry Brown and spending reductions that bolstered the state’s fiscal outlook.
The upgrade left Illinois, with the nation’s worst-funded pension system, as the lowest-rated state.
In addition to the new issue, California will remarket $228 million of Build America Bonds March 13, according to Lockyer’s schedule. The Build America Bond program gave states and cities a 35 percent federal subsidy on interest as part of an economic stimulus plan. California and local government sold more than $39 billion of the debt.
The state will take orders from individual investors March 12 and March 13. The taxable bonds will be priced March 13 and the tax-exempt debt will be priced March 14, said Tom Dresslar, a spokesman for the treasurer.
JPMorgan Securities and Goldman Sachs & Co. will lead the sale, Dresslar said in a statement.
California tax-exempt bonds due in September 2042 traded today with an average yield of 3.3 percent, or about 0.3 percentage point above benchmark municipal debt, data compiled by Bloomberg show. That spread has shrunk by more than half since the bonds priced in September.