LOS ANGELES - California achieved the lowest interest rate in 26 years when it priced $1.935 billion of general obligation bonds March 4, according to the treasurer's office.

"Despite investors' concerns over future interest rates, this week's sale showed a healthy appetite for California paper," California Treasurer John Chiang said in a prepared statement.

The yield for 30-year 5% coupon bonds, at 3.27%, was the lowest paid by the state since at least 1989, Chiang said. The true interest cost was 3.06% on the entire sale.

The state also achieved its lowest credit spread since June 2007 on the state's 30-year bond at 35 basis points using the most commonly-used market index, Chiang said. The yield on five-year bonds was 1.43 percent and the yield on 10-year bonds was 2.38 percent.

The $1 billion refunding is expected to save taxpayers more than $198 million in debt service costs over the life of the refunded bonds.

This week's sale also included $931 million in new borrowing for infrastructure needs, including transportation, education, and children's hospitals.

The final re-offering yields ranged from a low of 0.17 percent for a 2016 maturity to a high of 3.27% on the 5% coupon and 3.68% on the 4% coupon for a 30-year maturity.

Retail orders represented more than 30% of bonds sold.

"Recent credit upgrades have increased the market's confidence in the state's credit worthiness and individual and institutional investors alike eagerly got behind California," Chiang said.

Bank of America Merrill Lynch and Morgan Stanley led the deal.

The state received a one-notch upgrade from Fitch Ratings to A-plus ahead of the sale. Moody's Investors Service and Standard & Poor's rate the state's GOs Aa3 and A-plus, respectively.

The next state general obligation bond sale is expected in April, but the amount has not yet been determined.

A list of other scheduled sales can be found on the Treasurer's website.

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