America’s strapped states and cities took another hit Wednesday, with California seeing tepid demand for its latest bond sale and other governments pulling about $700 million worth of borrowing deals this week as investors continued stepping away from the municipal bond market.<\/p>\n
The normally staid market has grown volatile the past week, posting its sharpest selloff in nearly two years, as investors demand higher interest rates to buy paper issued by states, cities and counties to finance their operations. Localities have been hammered by a drop in tax revenue amid the downturn\u201d\u201dand unlike the federal government, most are barred constitutionally from running deficits.<\/p>\n
“The tax-exempt municipal bond market is a cold, cold world right now for issuers and taxpayers,” Tom Dresslar, a spokesman for the California State Treasurer, said late Wednesday. He added that the state decided to cancel another $267.3 million bond sale it planned to price next week “in light of market conditions.”<\/p>\n