Angelides Urges Purchase of State Bonds
California Treasurer Phil Angelides, who campaigned against approving Gov. Arnold Schwarzenegger’s $15-billion deficit-plugging bond plan, on Monday urged Californians to buy the securities, calling them a “good investment” backed by sales taxes.
“I would hope that as you look at all your investment choices, that you look, particularly Californians, at buying bonds of your home state so we can get the best price for the taxpayers,” Angelides said in a conference call with brokers, analysts, investors and others.
The state will begin a retail order period Monday and Tuesday for $7 billion in fixed-rate bonds. Institutional investors then will bid May 5.
Interest on the bonds will be exempt from federal and California income tax.
Though California has the lowest credit rating of any state -- a result of its budget woes in recent years -- major ratings firms last week awarded the deficit bonds higher grades.
The bonds won a rating of Aa3 from Moody’s Investors Service and a preliminary grade of AA-minus from Standard & Poor’s.
The deficit bonds -- which the state is calling “economic recovery” bonds -- will be backed by specific state sales tax revenue as well as by the state’s full faith and credit. That gives the securities “double-barrel protection,” Angelides said.
Yields on the bonds will be determined by what institutional investors are willing to accept. Many analysts said they expected the securities to yield in the range of 0.20 to 0.30 point more than what the highest-quality municipal bonds pay.
By contrast, the general obligation bonds the state sold last week had yields that were about 0.50 point more than top-rated muni issues. The general obligation bonds maturing in 20 years had a tax-free yield of 5.23%.
The deficit bonds are expected to be sold in terms ranging from one year to 13 years.
Individual investors would have to buy the bonds through brokers. The minimum purchase is $5,000. More information is available at the treasurer’s website, www.treasurer.ca.gov.
