State floats a $1-billion bond issue

California launched a $1-billion offering Monday of tax-free general-obligation bonds to raise money for infrastructure projects.

Because of recent turmoil in the bond market, Treasurer Bill Lockyer said he chose to have the deal done on a “negotiated” basis -- meaning that underwriters chosen ahead of time would negotiate rates and prices with the state.

The state had planned to sell the bonds via competitive bidding, under which one brokerage would win all the securities and resell them to investors.

Tom Dresslar, a spokesman for Lockyer in Sacramento, said the state wanted to attract more individual investors to the deal, in the hope of keeping interest rates down.

“You can’t achieve that objective and get the best deal for taxpayers with a competitive deal. You have to go negotiated,” he said.

Some big investors have turned skittish in recent weeks amid worries about the financial system. That has fueled a rush of buying of Treasury securities, while other bonds have gone begging for buyers.

The average yield on 20-year California general-obligation bonds was 4.77% on Monday, up from 4.53% in late October.

The state also chose not to buy private insurance for any of the bonds, Dresslar said, because concerns about the health of some insurance firms “raise too many questions about the value of the insurance.”