The multi-trillion-dollar municipal bond industry appears to be betting that California's balanced state budget and improving economy will pay off in an improved credit rating.
The Bloomberg financial news service reported Tuesday, in the wake of a generally positive appraisal by Standard & Poor's, that bond investors are demanding lower premiums for California bonds.
"The perception of California from an investor's perspective is that it's on an upswing," said Robert Miller, an executive at Wells Capital Management in Menomonee Falls, WI, told Bloomberg. "I don't think there is anybody out there who doesn't think that they are going to receive an upgrade at some point."
The state's credit plummeted to one of the nations lowest during years of deep recession and chronic budget deficits, but has been rising slowly.
An index of economic health devised by Bloomberg says that California's growth in the first quarter of 2013 was faster than the four next largest states, Texas, New York, Florida and Illinois. Among the factors were rising home prices and lower unemployment rates.
The state budget situation is also improving with revenues during the just-concluded 2012-13 fiscal year running about $1 billion above the level assumed by the 2013-14 budget.