California's ability to avoid triggering automatic spending cuts earlier this month appears to have polished some tarnish off the Golden State's image ahead of today's $407 million competitive offering.

"We're seeing signs that the California economy is turning around now," said Christian Smith, who runs two California funds totaling $361 million for Prudential Investment Advisors. "They still have a lot of budgetary problems, but revenues that are coming in are higher than what they [were] projecting in the original [1995] budget." Smith noted that California's better-than-expected cash position enabled it to avoid triggering a mechanism on Nov. 15 that could have forced automatic spending cuts in the general fund.

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