Troubled California Begins $14 Billion Bond Sale….For Some, Hope Springs Eternal!

Posted By on November 15, 2010

The rate will tell the story. If the rate is reasonable then it is illogical. If it is illogical then QE  (Quantitative Easing) has started to bail out states.  

          Jim Sinclair

This two-part sale of so-called revenue anticipation notes (Rans) allows California to bridge the gap to its tax season in the spring…… Hopefully!   Notice that we didn’t call it California’s tax collection season for good reason! The collections have been the hard part!


Troubled California Begins $14bn Bond Sale
         By Nicole Bullock in New York

California on Monday kicks off about $14bn of debt sales, hoping that investor desire for yield will outweigh concerns over the U.S. state’s fiscal trouble in a weak market for local government debt.

The Golden State is the starkest example of the financial difficulty facing U.S. local governments. Worries are mounting of a possible rise in defaults or a reassessment of risk in the $2,800bn municipal bond market, hitherto perceived as a safe place to invest.

California’s plans to sell its debt come just days after Arnold Schwarzenegger, the state governor whose term ends in January, called a special session of the legislature to address a state deficit projected to be more than $25bn over the next 18 months.

Orders begin on Monday for a $10bn, two-part sale of so-called revenue anticipation notes (Rans), an annual event that allows California to bridge the gap to its tax season in the spring. The notes, due in May and June, are targeted mostly at individual investors who benefit from tax breaks on so-called “munis.”

Muni bonds generally last week sold off on concerns about shaky finances and the looming end of federal subsidies for the Build America bonds (Babs) programme, which has boosted the market since the credit crunch.

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