budget deficit of $ 25 billion according to California

California is selling $ 10 billion tickets a year to boost cash on hand, as the state that produces 13 percent of the U.S. Gross domestic product is to assure investors that can repay the loan in the midst of a budget deficit of $ 25 billion.

Investors offered $ 2 billion of bonds maturing in May in the provisional returns of 1 percent to 1.25 percent, according to two people familiar with the offer. That's about 0.58 to 0.83 percentage points more than top-level municipal bonds one year from November 12, according to Municipal Market Advisors. The $ 8 billion of bonds maturing in June was trading at 1.25 percent to 1.5 percent, or about 0.83 to 1.08 percentage points more than top-rated notes.

The problem comes after the state Legislative Analyst's Office said the California deficit may exceed $ 25 billion over the next 19 months, including $ 6.1 billion in the fiscal year ending in June. Treasurer, Bill Lockyer, also is selling 3.75 billion U.S. dollars of long-term liabilities, as of this week.

"If you're full of California, then do not add fuel to the fire," said Marilyn Cohen, president of Envision Capital Management in Los Angeles, which manages $ 250 million in fixed income assets. "If California have little exposure and have cash sitting in money markets, then you better make sure it is worth your time because the news headlines will continue to go from bad to terminal."

Individual investors

The State shall take orders today and tomorrow from individual investors for the revenue anticipation notes, municipal bonds, short-term RAN known as the State provides cash when the pay is low and the collection of taxes later. Institutional investors like mutual funds November 17 orders. JPMorgan Chase & Co. is managing the sale, along with De La Rosa & Co. and Wells Fargo Securities.

California notes hit the market after yields on top-rated municipal bonds a year rose 1 basis point to 0.42 percent on Nov. 12 after falling to its lowest level in August. Top-rated municipal bonds a year yielded 0.3 percent on Aug. 18, according to the MMA, the lowest since the index began in 2001. A basis point is 0.01 percentage point.

The notes are classified F2 by Fitch Ratings, the third highest. Standard & Poor's rated the SP-1 notes, the second highest, while Moody's Investors Service assigned the notes MIG-1, its highest rating. S & P ranks of the long-term debt of California, A-, its fourth year of lower investment, higher risk among U.S. states.

No Surprise

The deficit projection LAO "not surprising, and it should not surprise investors," said Tom Dresslar, a spokesman for Lockyer. "We fully disclosed the potential economic problems in our brochure RAN supply, and do not expect that the projection of the OAI to affect the operation of cash flow borrowing. I still have more than enough cash available to pay RAN in time and in full. "

When California sold $ 8,800,000,000 of debt a year on 23 September last year, notes that matured in May were at a yield of 1.25 percent, or about 59 basis points more than a year bonds primetime according to the MMA, an independent research firm based in Concord, Massachusetts. Notes that matured in June were at a yield of 1.5 percent, or 84 basis points more than the highest rated debt at the time.

Lockyer was able to sell 6.64 billion U.S. dollars of the notes to individual investors, or about 75 percent of the total.

'Punitive' Performance

The "punishment" California Performance pay this year will be determined by the amount of interest from individual investors that the state can draw, Regina said Shafer, who oversees $ 5.3 billion in tax-exempt municipal bonds as senior vice president of investments bond for USAA Investment Management Co. in San Antonio, Texas. The notes will be attractive to retail buyers as compared with cash alternatives like money market funds, which offer lower yields, he said.

"Given the marketing effort will probably be a very easily," said Shafer. "In states with high tax rate, is very attractive. I think retail is going to be very successful."

Texas paid $ 7,800,000,000 August 24 through ticket sales and forecasting tax revenues a year, paying a weighted average interest cost of 0.34 percent, or 4 basis points more than top level bonds a year, according to the Comptroller's web site for sale. The notes carried the highest ratings in the short term from Moody's, S & P and Fitch.

New Jersey, whose short-term debt also carries a higher credit rating, provided 2.25 billion U.S. dollars with a yield of 0.33 percent on Aug. 19. That was 3 points higher than the highest rated debt at the time.

Extra Performance

California sold about $ 6.3 billion in public debt, the obligation after its RAN sale last year, according to data. In the midst of increased supply, the extra yield on AAA bonds for debt investors required 10 years of state issuers have increased to 158 basis points to 104 basis points year on 8 October.

States and municipalities are able to borrow some 16.8 billion U.S. dollars this week, most on record, according to data compiled by dating from 2003. Issuers are expected to offer more than 20.1 billion U.S. dollars in the next 30 days, the index visible supply on November 12, the most since October 23, 2009, almost double the daily average this year.