A New York trading firm opened an electronic market for California IOUs on Wednesday, although it might be a few days before any transactions are made.
SecondMarket Inc., a firm that specializes in trading hard-to-sell financial instruments, said it expects considerable demand for the interest-bearing notes issued by California's controller.
The market took flight after most of California's big banks stopped honoring the IOUs last Friday, leaving some IOU holders scrambling to cash them. SecondMarket said hedge funds and other deep-pocketed investors are prepared to buy notes at a discount, providing immediate cash.
Bidders are offering 80 to 95 cents on the dollar on Craigslist and other Web sites.
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Through Tuesday, the state had issued $588 million worth of IOUs in two weeks to local governments, state suppliers and taxpayers expecting refunds. Nearly $2.9 billion in total are expected to be issued this month as the state copes with a cash shortage and a $26.3 billion deficit.
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