California Having Trouble Selling $10 Billion In Revenue Anticipation Notes

California is so bankrupt that it is selling revenue anticipation notes, which is similar to an individual taking out a payday loan. You borrow money and back it up with future revenue you expect to receive. It seems bond investors are not willing to hand over their money, despite the state running advertisements extolling the virtues of investing in California. So far individuals have balked at the deal as only $4.4 billion of the $10 billion deal sold yesterday and reports say the total is only $5.6 billion after the second day. This compares poorly to the last Revenue Anticipation Note sale, when first day orders totaled $5.4 billion, or 61% of the total offering. You can't really blame people for shunning the deal. Take a look at the chart to the right, which shows what is happening in the California municipal bond market. Who the hell would buy into a crashing market?
  
From Dow Jones:

Sales of California's $10 billion revenue anticipation notes slowed on Tuesday, with the state reporting total orders of $5.57 billion for the securities.

Sales had totaled $4.43 billion Monday, the first day of a two-day order period, leaving just $1.14 billion sold by 1 p.m. Pacific time, Tuesday, according to State Treasurer Bill Lockyer's office.

The notes were sold into a rapidly declining municipal bond market, where supply was overwhelming demand and where dealers were kicking out bonds at almost any price in order to clear inventories as more bond deals kept flowing.

Individual investors chipped in for $4.86 billion of $8 billion securities that will come due next June 28, and for $5.57 million of $2 billion in notes maturing next May 25. The June notes offer higher yields, quoted Tuesday at 1.5%, while the May notes were quoted at 1.25%. Each series was at the outer limit of preliminary yield ranges offered Monday.

Several hours of trading were still left in California's day, after which the notes will be offered to institutional investors Wednesday.

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