California boosts planned bond sale to $2.5 billion

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California once again has increased the size of a planned debt offering, anticipating strong investor demand despite the state’s weak credit rating.

Treasurer Bill Lockyer late Monday said the state would try to sell $2.5 billion of taxable municipal bonds this week, up from what had been expected to be a $2-billion deal.

The proceeds mostly will fund infrastructure spending that voters have approved in recent years.
About $1.6 billion of the securities will be so-called Build America Bonds, which are partly subsidized by the U.S. Treasury.

Lockyer on March 11 sold $2.5 billion of tax-exempt muni bonds, a deal that also was boosted by $500 million thanks to yield-hungry investors.

This week’s sale of taxable bonds will be aimed mainly at institutional investors such as pension funds. Individual investors typically are big buyers of tax-exempt muni bonds but not taxable issues. Lockyer is reserving just one security for individuals in this sale: the bond maturing in 2019.

For more on this week’s sale and some new controversy over the Build America Bonds program, see this earlier post.

-- Tom Petruno