Terminator-turned-governor Arnold Schwarzenegger, who has played the hero in many movies, will now try to rescue California from its dire financial straits.
Schwarzenegger will soon seel Build America Bonds to individuals to raise money.
California, suffering from record unmployment and the lowest credit rating of any state, plans to borrow US$4.5 billion (Bt151 billion) this week for schools, parks and hospitals after municipal bond yields fell to a 42-year low.
Bloomberg reports worth of federally subsidised, taxable will sell $3.2 billion worth of federally subsidised, taxable Build America Bonds and $1.3 billion worth of tax-exempt debt, the biggest municipal financing of the week. While yields on 30-year Build America securities that California sold in April fell to 6.68 percent last Thursday, from 7.43 per cent when they were sold, the rate remains 0.53-percent-age-point more than the average US corporate note due in more than 15 years, Bank of America's Merrill Lynch & Co indexes show.
California is reaping the benefits of the highest returns on tax-exempt debt since 2000 even as it projects a deficit of $38 billion over the next three years. Pacific Investment Management's Bill Gross said the state might lack the "discipline" to plug the gap.
"I'm not a strong buyer at these levels," said Ken Naehu, who oversees $2.5 billion in bods as head of fixed income at Bel Air Investment Advisers in Los Angeles.
"Investors should know that the issues and problems with the state's finances have not been resolved."
California's record 12.2-per-cent unemployment rate in August compared with 7.6 per cent in the same period last year and 5.5 per cent two years earlier. The Labour Department last week reported the nation's unemployment rate reached 9.8 per cent last month.
Tax revenue has missed Governor Schwarzenegger's Budget Office projections, falling 1.3 per cent from forecasts when the state legislature approved the present spending plan totalling about $85 billion in July.
California will offer Build America Bonds to individuals today and tomorrow and to institutions on Thursday, said Treasury spokesman Tom Dresslar. The last time it sold long-term securities was April's $6.85 - billion deal.
The state was among the first to sell Build America Bonds, which are taxable securities.
Saturday, October 31, 2009
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