California offers nearly $4.8 billion in bonds

California will lead a wave of state and local borrowing this week with an offering of nearly $4.8 billion in tax-exempt general obligation bonds.

Just three weeks after the state sold $4.45 billion of tobacco-settlement-backed bonds, the nation’s biggest tax-exempt borrower is returning with a deal that would be the fourth-largest debt offering in municipal market history.

The state is taking individual-investor orders for the bonds today via brokerages. The bonds will be sold in denominations of $5,000 and in maturities ranging from later this year to 2033. Institutions will place orders for the securities Wednesday.

The offering is a “refunding,” meaning the state is refinancing previously issued debt at what it hopes will be lower interest rates.

The yield on an index of five-year California notes was 3.68% on Monday, according to Bloomberg News. Ten-year notes yielded 3.95%. Because the interest is exempt from federal and state income taxes for California residents, true returns are higher, depending on an investor’s tax bracket.

California general obligation debt is rated A-plus by Standard & Poor’s and A1 by Moody’s Investors Service. Because of the state’s recent history of running annual budget deficits, its credit rating is the lowest of any state except Louisiana.