Latest California GO Bond Deal Unfair to Investors

The State of California priced its first General Obligation issue of 2004 on Friday, February 19. From the moment it was sold, this 2 Billion dollar deal can act as one example among thousands and thousands of how unfair the Muni Markets are. (Please see table below.)

On its first day, the offer side was spread at just more than 1 full point. Some investors were able to purchase the new California GO 5% due 2/1/33 at 98.939, while others paid 100 (or par.) This showed a yield disparity of 7 basis points. The investors who paid 98.939 had a yield of 5.07%, while those who paid 100 had a yield of 5%. But by the next trading day spreads inexplicably worsened. Some investors paid 99.315 and got a yield of 5.04%, while on the same day others paid 101.957 and got a yield of 4.75. Two days later, and still within new issue syndicate, price fairness worsened even further. Some investors paid 99 while others on the same day paid 103.383. This full 4.383 point spread meant some investors got a yield of 5.07%, while others got only 4.57% -- a 50 basis point disparity!

To SEC and MSRB and NASD:
MunicipalBonds.com wishes to ask if you think investors are being offered original issue pricing (or original issue discounts when applicable.) If not, why?

Also, you (SEC and MSRB) have recently come out with notices and studies finally acknowledging MunicipalBonds.com's price studies that show unfair pricing in the Muni Markets. You've just warned Wall Street to be sure they are pricing Municipal Bonds "fairly and reasonably", and specifically to check prices and yields in the marketplace. This is the first big deal since, and it didn't work.

MunicipalBonds.com has submitted ideas to you on Muni fair pricing. To begin with, you were first to see our idea at www.MuniMarket.com. Why don't you specifically comment on this?

To California Treasurer Angelides:
MunicipalBonds.com appreciates your interest and attention to our daily trade/price reports and recommendations on Muni fair pricing. But are you ever going to do anything? Action would be better. Do you care that some of your investors must pay more than four full points higher? You've been considering our Issuer proposals since 2002...what do you think?
What do you think of our Muni industry proposal at www.MuniMarket.com?

Trade Date	Municipal Bond Name / Description	Coupon	Maturity	Bid Side Customer Sold to Dealer (Lowest / Highest)		Offer Side Customer Purchase from Dealer (Lowest / Highest)	Yield* Offer Side (Lo Px / Hi Px)	# of Trades	Volume (000)
02/17/2004	CALIFORNIA ST	5.000%	02/01/2033	99.250 / 99.250		99.350 / 102.497	5.04% / 4.67%	21	1420
02/18/2004	CALIFORNIA ST	5.000%	02/01/2033	100.778 / 102.178				2	55
02/18/2004	CALIFORNIA ST	5.000%	02/01/2033			99.750 / 102.000	5.02% / 4.73%	8	620
02/19/2004	CALIFORNIA ST	5.000%	02/01/2033	95.793 / 95.793		99.500 / 102.250	5.03% / 4.70%	16	425
02/20/2004	CALIFORNIA ST	5.000%	02/01/2033	102.750 / 102.750				2	80
02/20/2004	CALIFORNIA ST	5.000%	02/01/2033	96.500 / 99.280		98.850 / 100.871	5.08% / 4.88%	15	2095
02/20/2004	CALIFORNIA ST	5.000%	02/01/2033	97.839 / 99.390		98.939 / 100.000	5.07% / 5.00%	84	14730+56
02/23/2004	CALIFORNIA ST	5.000%	02/01/2033	96.000 / 98.740		99.946 / 102.644	5.00% / 4.65%	13	400
02/23/2004	CALIFORNIA ST	5.000%	02/01/2033	99.039 / 99.390		99.315 / 101.957	5.04% / 4.75%	26	8580+7
02/24/2004	CALIFORNIA ST	5.000%	02/01/2033	103.000 / 103.000		105.756 / 105.756	4.25% / 4.25%	2	50
02/24/2004	CALIFORNIA ST	5.000%	02/01/2033	98.740 / 99.250		100.500 / 100.932	4.93% / 4.88%	7	1665
02/24/2004	CALIFORNIA ST	5.000%	02/01/2033	99.744 / 100.290		99.844 / 102.040	5.01% / 4.74%	24	4410+9
02/25/2004	CALIFORNIA ST	5.000%	02/01/2033			104.974 / 105.767	4.35% / 4.25%	2	35
02/25/2004	CALIFORNIA ST	5.000%	02/01/2033			100.000 / 101.954	5.00% / 4.74%	6	165
02/25/2004	CALIFORNIA ST	5.000%	02/01/2033	99.567 / 99.567		99.000 / 103.383	5.07% / 4.57%	12	560+5
02/26/2004	CALIFORNIA ST	5.000%	02/01/2033	101.880 / 101.880				1	10
02/26/2004	CALIFORNIA ST	5.000%	02/01/2033			100.000 / 102.500	5.00% / 4.67%	10	1180
02/26/2004	CALIFORNIA ST	5.000%	02/01/2033	99.205 / 99.205		100.454 / 103.584	4.94% / 4.55%	13	3310+3
02/27/2004	CALIFORNIA ST	5.000%	02/01/2033	99.000 / 99.665		103.119 / 103.119	4.59% / 4.59%	5	365
02/27/2004	CALIFORNIA ST	5.000%	02/01/2033	99.540 / 99.540		99.415 / 103.584	5.04% / 4.55%	25	6270+9

Contact: Kevin Olson
Organization: MunicipalBonds.com
Phone: 415-922-7870
Email: Kevin@MunicipalBonds.com
URL: http://www.MunicipalBonds.com