Any pushback on CA munis?

Not really. Wall Street investors are showing little hesitation about buying into the state, despite all the deficit woes. On the contrary - as the LAT's Tom Petruno notes, the annualized tax-free yield on the state's five-year general obligation bonds is now about 2.1 percent, almost half of what it was in mid-2009.

In part, California bonds are just following the national trend in muni yields. Interest rates on fixed-income securities in general have fallen across the board over the last two months as money has continued to pour into the bond market. Disgusted with the stock market and fearful of the economy, people want something that pays regular interest and feels relatively safe. Bonds fill the bill.

In some quarters, the prospect of California having to issue IOUs in the next couple of months is actually considered a positive because it would ensure that the state still has enough cash to pay its bondholders. And there's always the federal government should things really get bad. Still, not everybody is so comfortable with munis - in California or anywhere else. From Reuters:

It is "one of those rare times -- approximately once a century -- when (munis) are at serious risk of default," [said analyst Robert Prechter]. "The whole municipal area is likely to see a decline in price and a rising yield ... over the next several years."

The cumulative budget shortfall among states will likely reach $140 billion in the current fiscal year, according to the Center on Budget and Policy Priorities. Last month, Warren Buffett said that municipal bonds faced a "terrible problem."