Ok, it might be a little much to suggest that there’s another gold rush going on in California. But investors did flock to the state’s latest municipal bond offering and they did so in such a way – like New Jerseyans queueing up days before tickets for a Bruce Springsteen concert go on sale – that California raised the size of its offering by 25%.
This speaks in part to how investors, individuals in particular, don’t believe California will default any time soon – as colleagues Kelly Nolan and Jodi Xu noted in a story today, the state does have a $20 billion budget hole. But perhaps more so, it speaks to how investors in general are wiling to take on some risk – call it measured risk.
This bond sale comes at a time when Detroit successfully sold bonds to help it close its budget gap. Detroit has been particularly hard hit in the recession with all of the auto industry jobs that were lost.
And it comes at a time, as noted by Newswires reporter Michael Aneiro in a page one piece in today’s Wall Street Journal, when investors are willing to buy riskier corporate bond securities. Not crazy risk, like pre-market crash days when companies sold bonds that paid interest not in cash but n additional bonds. But more calculated risk. Before the crash, the market was at the extreme level of ignoring risk. Post crash, the market’s froze because everyone was afraid of their own shadow – everything was risky.
Now, perhaps, things are returning to what one would call more normal levels.