California Wants To Sell “Mini Bonds” On The New York Stock Exchange

California rollercoaster

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California lawmakers are considering legislation that would allow the state –  already the largest issuer of municipal debt – to start selling $25 “mini bonds” on the New York Stock Exchange, Bond Buyer reports. State Treasurer Bill Lockyer is pushing California legislators to pass a bill that would allow minimum general obligation bond units to drop from $1,000 to $25, a move designed to extend the state’s reach into the retail bond market.

The bill, which cleared the state Assembly’s Appropriations Committee last week, could “open up a largely untapped investor base,” according to an Assembly analysis. The legislation now awaits action by the full chamber.

Only a few states have sold these preferred securities, John Hallacy, manager of municipal research at Merrill Lynch, told Bond Buyer.

“There have been some complaints about liquidity in the bond market and [these securities are] a way to assure liquidity in some respects,” Hallacy said.

While California would like the ability to sell the new securities, a spokesman for Lockyer said the state has yet to decide whether it would actually sell the mini-bonds.

Lockyer’s proposed legislation comes amid uncertainty about California’s budget. The state, which has authorised $37 billion of debt that has not yet been issued, has no plans to go to market before the fall.