California debt binge shakes up muni bond market

LAT ^ | 11/10/09

[TigerLikesRooster]

California debt binge shakes up muni bond market

November 10, 2009 | 8:48 pm

The municipal bond market’s message to California: Enough with the borrowing already!

Over the last seven weeks the state has sold more than $21 billion of short- and long-term debt for budget-related reasons and to finance voter-approved infrastructure projects.

That flood -- in a period when muni bond yields nationwide already were rebounding after diving in summer -- has helped to boost yields more than they might otherwise have risen, some analysts assert.

"Yields are higher because California has so much paper in the market," said Matt Fabian, who tracks muni bond trends at Municipal Market Advisors in Westport, Conn.

The state has been its own worst enemy: Its borrowing costs have risen with each bond deal, which means taxpayers will bear a bigger hit to service the debt over time.

Rising market yields also have the effect of devaluing older fixed-rate muni bonds. If you own a California muni-bond mutual fund, chances are its share price has been sliding since the end of September as the market has suffered indigestion from the supply of new bonds.

[TigerLikesRooster]

Ping!

[JackOfVA]

If I were loaning money to the state of California, I would want the same interest rate that Vito and Guido get for payday loans, as the chances of repayment are about equal.

Jack

[ErnBatavia]

If you own a California muni-bond mutual fund

We did, but got totally out close to a year ago.

[rbosque]

I would never buy Ca. state paper. They are in debt and the state legislature keeps buries its head up its ass. They keep spending and spending while blaming the Governator. No thanks.

[GOPJ]

"Yields are higher because California has so much paper in the market,"

And with the greater chance of default - they've got to pay more to get "marks" to invest...

[concentric circles]

"Ken Naehu, who manages bond investments at Bel Air Investment Advisors in L.A., believes the state’s budget woes are far from over, which Schwarzenegger acknowledged Tuesday. Still, a 4% tax-free yield on a bond maturing in less than four years was too good an opportunity to pass up, he said."

"We gave them a large order," Naehu said."

The state's revenue for 2008-2009 was $130 billion. That's a tremendous stream of income. I don't think the state will be failing to pay off bonds in the foreseeable future. 4% tax free for four years is pretty attractive.

[IGBT]

as long as california uses base line budget schemes and scams, they will always be in the honey bucket. The reckless libral legislature is responsible. They need to subtract baseline budget increases in all dept.till the budget is balanced. And get rid of CARB (killcarb.org) and cal epa. Both are huge parasites on the taxpayer and small business.

[genghis]

If I were loaning money to the state of California, I would want the same interest rate that Vito and Guido get for payday loans, as the chances of repayment are about equal.

who in their right mind would loan cal money at 4%??
the fund managers should bee killed then fired.

[TenthAmendmentChampion]

A week or so ago we drove down to Los Angeles. Both KMJ (the major Central Valley talk station) and KFI (the number one AM station in SoCal) were running ads from the state urging listeners to buy their bonds.