Gov. Arnold Schwarzenegger Wednesday afternoon signed a bill designed to help bond issuers avoid higher interest rates on government-issued bonds hit by the fallout from turmoil in capital markets and the bond insurance industry.

The measure, introduced by Sen. Michael Machado, D-Linden, at the request of Treasurer Bill Lockyer, clarifies that California law permits issuers to buy up their outstanding debt and hold it for a period without legally extinguishing the bond debt. It is anticipated that the law will be a particular help to issuers with outstanding variable-rate debt that has been resetting at high interest rates due to concerns about underlying bond insurance.

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