California to sell about $7 bln bonds in 2013 -Treasurer

WASHINGTON Fri Feb 8, 2013 2:33pm EST

WASHINGTON Feb 8 (Reuters) - The state of California will likely sell $7 billion of general obligation bonds this year in two parts, with the first half of the sale in a few months, Treasurer Bill Lockyer told Reuters TV on Friday.

"It's probably two or three billion," Lockyer said of the spring issuance. "We're still working with the spending agencies in the department of finance to determine their specific needs for capital cash this spring."

California will return to the market in the fall, he added.

Last week, Standard & Poor's upgraded the state to A with a stable outlook, from A-minus with a positive outlook. Earlier this week, Moody's Investors Service said Governor Jerry Brown's proposed budget reflected a "significant improvement" in California's finances, but it decided to hold the state's credit rating at A1 with a stable outlook.

The ratings moves will likely allow California to keep borrowing costs low, Lockyer said.

"On the investor side we're finding very helpful movement in the market for us as the demand has improved - the ratings of course have helped probably with that," said Lockyer. "We've always had fairly substantial retail interest independent of the large institutional investors."

The $3.7 trillion U.S. municipal bond market, which has widely anticipated the S&P upgrade, pushed yields on California's bond lower on Thursday. California's 10-year general obligation bonds yielded 0.29 percent more than top-rated municipal debt, compared with 0.37 percent on Wednesday and the nearly 2 percent more they offered in 2009.

The $3.7 trillion U.S. municipal bond market, which has widely anticipated the S&P upgrade, pushed yields on California's bonds lower.

Prior to the S&P upgrade, California had the third widest 1-year yield spread after Puerto Rico and Illinois among main muni debt issuers monitored by Municipal Market Data. After the upgrade, California had the ninth-highest 10-year yield spread at about 29 basis points over triple-A rated municipal bonds.