By Daily Crux Editor Justin Brill:

California continues to deteriorate…

The state borrowed another $1.9 billion yesterday by issuing bonds that mature in June 2013, but was unexpectedly forced to pay a 4% annualized yield. Estimates assumed the bonds could be sold for just 3%.

California has issued so much debt in recent months, fewer and fewer individual investors are eager to buy the state's bonds, which allows big institutional investors to demand more yield when buying up the remainders.

The state has issued more than $21 billion in debt since the end of September for "budget-related reasons." Barring a rapid turnaround in its economy, Cali's situation is likely to get worse, as the state begins paying higher interest rates to finance its budget deficits. It could be a preview of our federal government's deficit crunch.

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