California cuts size of bond deal

By Nicole Bullock in New York

Published: October 9 2009 00:19 | Last updated: October 9 2009 00:19

California on Thursday cut a bond sale to $4.14bn from $4.5bn and boosted the yields in a sign that investors are growing wary of the debt of cash-strapped US states, cities and other public borrowers.

The $2,800bn municipal bond market, where local governments raise money, had rallied recently, sending yields to their lowest levels in more than 40 years. Yields rose this week as concern re-emerged about the weak finances of many muni issuers.

California is the poster child for fiscal strife after a budget crisis, over closing a gap of more than $20bn. Lawmakers agreed to spending cuts, but the state is expected to continue to struggle with shortfalls.

“This sale is a sign that Wall Street has not forgotten that California has issues,â€