California Yield Penalty Shrinks to 75 Bps

California debt is poised to extend its biggest rally in at least 18 years as Governor Jerry Brown curbs borrowing and pushes for tax increases to plug deficits.

The extra yield over top-rated municipal bonds that investors demand to own 10- year securities of the most-populous U.S. state and its localities is set to fall for a fifth straight quarter.

That’s the longest streak since 1994, data compiled by Bloomberg show. California issuers are on a pace to sell about a third less than in 2009, stoking demand for a $1.55 billion state general-obligation sale to start tomorrow.

At 0.75 percentage point, the interestrate penalty California borrowers pay above AAA has dropped by a third since Brown, a 74-year-old Democrat, took office last year and began whittling down chronic deficits.

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