Also, triple-A rated corporate bonds have become scarce since the financial crisis of 2008 over the wide range of maturities needed for dedicated portfolios.

These levels of reassessment are surprising for AAA rated bonds, which have the same rating class as US government bonds.

The yields on the nontaxable debt were as much as 10 basis points higher than those on existing, similarly rated bonds.

Similarly rated bonds these days pay double that yield premium.

Last week Moody's Investment Services, which rates bonds, said Mr. Pataki's budget plan depended heavily on continued economic growth and cuts in Medicaid.

New York today is still considered to be a more attractive place to work and live, said Mr. Kurtter, who rates bonds for cities and states nationwide.

Duff & Phelps Credit Rating Company, which rates bonds and other debt, is not part of the new company.

The Federal Reserve also announced that it would potentially consider highly rated covered bonds as acceptable collateral for emergency fund requests.

But during the 2008 financial crisis this relationship broke down, as Baa rated corporate bonds peaked at over 9%, and 10-year treasuries bottomed under 2.5% (see figure 3).

They pay three or four percentage points more than comparably rated corporate bonds in a world where deals often hinge on a fraction of a percentage point.