CA tests credit market with bonds

March 23, 2009 7:08:03 PM PDT
An effort to get Californians back to work is off to a surprisingly strong start this week. People began buying-up billions of dollars in state bonds as soon as they went on sale today. tThe frenzy could unfreeze hundreds of highway projects.

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Investors weren't the only ones cheering Wall Street on Monday, the construction industry was too. California began testing the market for the first time since the credit crunch last fall. If all $4 billion in general obligation bonds are sold by Wednesday, $500 million of it will help re-start public works projects that have been stalled for months.

"I know they'd like to see this come about and put more work out there to bid, so that a lot more people can go back to work," said Carl Edwards, an unemployed construction industry worker.

With federal infrastructure money still making its way to California, that are more than 5,000 roads and other public works projects on hold, just waiting for funding. That's contributed to California's 10.5-percent unemployment rate.

"We want to get back to the credit markets, sell California bonds, and use those proceeds to help get back into the infrastructure game as quickly as possible," said H.D. Palmer, from the California Department of Finance.

A successful California bond offering isn't a sure thing. The state budget crisis made Wall Street nervous enough to give the Golden State the lowest credit rating in the country. However, with tax-free yields of up to six-percent, it is an attractive investment to individuals.

"From the standpoint of demand, I think today was a clear indication that in the bond market, there's still a lot of investors out there who are hungry for tax-free bonds," said Joseph Eschleman, from Wachovia Securities.

There was only one more day of selling to individual investors to go before the powerhouse institutional investors get a chance to put California over the magic $4 billion mark, and with it, maybe a hiring spree.

"I'm crossing my fingers and saying a prayer," said Edwards.

To help tide over those out of work, the state Assembly finally approved a 20-week extension in jobless benefits for the long-term unemployed. Nearly half-a-million eligible Californians have almost maxed out their eligibility, but can now qualify for more help with this new extension.

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