From the Los Angeles Times' Money & Co. blog:
California was forced to raise interest rates on $10 billion in short-term debt it sold Thursday, another sign of the turmoil that has racked the municipal bond market in recent weeks.
The state, selling so-called revenue anticipation notes that will mature in May and June, set the yield at 1.50% on the May issue and 1.75% on the June issue -- up from initial estimates of 1.25% and 1.50%, respectively. The interest is exempt from federal and state income taxes.
The increase in rates shows that institutional investors such as money market funds demanded higher returns to buy the debt. Those investors placed their orders Thursday, after individual investors put in orders for $6.06 billion of the securities from Monday through Wednesday.
Investors have pulled back from buying bonds in general this month, driving yields sharply higher. The muni market has been hit particularly hard, in part reflecting a heavy supply of new issues and investors’ concerns about the strained finances of state, cities and other municipalities....MORE
