Buy Early, Buy Often

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Today marks the beginning of probably the most closely watched California bond offering in recent memory, as the state plops the bait in the rough waters of Wall Street... waiting for a bite. A big bite.

The state treasurer's office has launched the sale of revenue anticipation notes (RANs), which amounts to a short-term bridge loan that seems to be desperately needed to deal with California's seasonal ebb in tax revenues. The plan is to sell a $4 billion RAN in phase one, and up to another $3 billion after that, if all goes well.

That last phrase... "if all goes well"... is why this has become news. Wall Street's jitters have persisted in recent days, and the success of the RAN sale isn't guaranteed. Governor Schwarzenegger has even gone so far as to put the feds on notice that a weak market response to the sale could force California to come calling, hat in hand, for a loan (though his most recent communique was more upbeat).

A spokesman for Treasurer Bill Lockyer says the initial sales to individual investors could come with an interest payment (yield) of up to 4% for RAN purchases paid back by the state on May 20. The yield would rise to as much as 4.5% for RAN investors who are willing to wait for repayment until June 22. Final interest rates won't be known until later this week, when the fishing line is thrown into the water for institutional investors.

We may get some preliminary sense of how the fishing is going later this afternoon.

[1:46pm update -- Well, the early data might be a good sign. The treasurer's office reports almost $1.5 billion in RANs bought by investors in just the first few hours today, an amount that's almost 37% of the entire initial offering.]

[update 5:30pm -- Final numbers show the state sold $1,836,000,000 worth of RANs today. That's almost 46% of the entire first round of notes, which sounds good. A written statement from Lockyer called it "an excellent start" to a "good deal" for California taxpayers.

And this tidbit from the guv's folks: Schwarzenegger himself bought $100,000 worth of RANs today. Looks as though he'll make an extra $4500 in interest payments by the time the notes are paid off.]

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About John Myers

John Myers is senior editor of KQED's new California Politics & Government Desk. He has covered California politics for most of the past two decades, serving previously as Sacramento bureau chief for KQED News and most recently as political editor for KXTV News10 (ABC) in Sacramento. In 2014, he was named one of the nation's top statehouse reporters by The Washington Post. Follow him on Twitter @johnmyers.

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