UPDATE 2-California GO debt sale short of $4.5 bln goal

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SAN FRANCISCO Oct 8 (Reuters) - California Treasurer Bill Lockyer's office said on Thursday it priced a total of $4.138 billion of general obligation bonds in its sale of the debt this week, less than the $4.5 billion it had put up for sale.

Despite falling short, Lockyer said in a statement the sale's total was a "significant accomplishment" in what he termed a "cold and inhospitable market" this week.

California faced considerable competition for its debt as supply was heavy this week in the primary market, where an estimated $9.4 billion of debt was expected to be priced.

"Unfortunately, California seems to have come to market right when buyers are starting to balk at the absolute low level of yields," added Guy LeBas, chief fixed-income strategist at Janney Montgomery Scott in Philadelphia.

California's deal included $2.82 billion in taxable bonds, with $1.75 billion in Build America Bonds, and $1.31 billion in tax-exempt bonds.

Yields ranged from 3.75 percent to 7.23 percent for the taxable debt and from 2.95 percent to 5.0 percent for the tax-exempt bonds.

The net yield on the 30-year BABs, including the 35 percent federal subsidy, was 4.70 percent.

Individual investors bought $505.2 million in total orders during the two-day retail order period that ended Wednesday.

Tax-exempt orders totaled $427.7 million, or 33 percent of the $1.3 billion offering to retail investors. Taxable orders totaled $77.5 million, or 31 percent of the $250 million offering to retail investors.

Institutional investors purchased the balance of the offerings.

California GO deal may also have struggled because of the state's successful sale of $8.8 billion revenue anticipation notes last month -- the state's first foray into the municipal debt market since its recent budget crisis was resolved.

That short-term debt sale may have exhausted interest among many investors for California debt, said Alexander Anderson Jr, a portfolio manager at Envision Capital Management Inc in Los Angeles: "There was a ton of demand for the California RAN deal."

California's GO deal also faced competition from a rallying stock market. For details, double-click [ID:nN08542438].

"People are starting to put their money to work in more risky assets," Anderson said.