Apparently bond buyers no longer believe the state is about to fall into the Pacific. As Tom Petruno posts at Money & Co., the average California long-term muni bond fund has risen 14.8 percent this year, according to Morningstar. That's better than the 14.6 percent total return of the Vanguard 500 Index stock fund (it's actually a lot better because muni bonds are tax exempt). Last month, the major credit-rating firms said California's budget deal should stabilize the state's fiscal situation. Higher demand means lower yields - and thus less costly financing.

It also has helped that there hasn't been much issuance of new California muni issues, particularly in the shorter-term maturities favored by individual investors. "Pent-up demand in California far outweighs the light supply" of new debt, said Joe Lee, a trader at De La Rosa & Co. in Los Angeles. "I guess everyone is sick of sitting on cash."