LOS ANGELES -- Some market participants have overreacted to California's problems and possibly created an attractive opportunity by driving yields higher than necessary on the state's general obligation bonds, according to a report by Sanford C. Bernstein & Co.

The report, which came out this week and updates a 1991 analysis that correctly predicted a round of downgradings for the state, concludes that California's fundamental strength supports a double-A general obligation rating.

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