The first batch of California's voter-approved deficit bonds sold so fast Monday that the state treasurer's office is likely to change the terms on future sales to save the state money.

Individual investors bought more than $1.3 billion worth of California bonds Monday, as much as state officials expected to sell over a two-day period.

Because of the high demand, state officials say they believe they can sell the bonds at a cheaper price - returning less to the investor and giving more to the state. The amount of state savings will not be determined until after the sale.

"Today's results have met or surpassed retail expectations," said Barbara Lloyd, the interim chief deputy treasurer.

In March, voters authorized the state to sell $15 billion in bonds to reduce a budget deficit.

State officials are scheduled to sell $7.8 billion over a three-day period beginning Monday and $5.3 billion in early June. The balance of the authorization could be sold as needed.

On Monday, the bond sale was opened to individual investors, and it is scheduled to continue today. On Wednesday, the remainder of the $7.8 billion sale will be offered to institutional investors such as mutual funds.

Bond market watchers said Monday's offer was attractive to investors because it is a safe investment backed not only by the state's general fund, but also by a dedicated quarter-cent sales tax.

Observers also gave the state credit for promoting the bonds aggressively.

"They've done a good job in marketing this deal," said George Strickland, who manages municipal bond funds for Thornburg Investment Management. "The market tends to pile on highly publicized deals."

California continues to have a low credit rating on Wall Street because of its ongoing budget deficit. Because the deficit bonds are tied to a sales tax, however, their rating is much better than the state's general obligation bonds.

Still, one reason the deficit bonds are attractive to investors is that they are considered safe and have a higher yield than the highest-rated triple-A bonds.

On Monday, the state offered investors who hold the bonds for five years a return of 3.24 percent. If held to maturity, the bonds could yield 4.90 percent. The typical triple-A rated municipal bond - held for five years - carries a 3.06 percent yield.

The bonds, placed on the March ballot by Gov. Arnold Schwarzenegger, will go to pay off short-term borrowing due in June.

Recently, the three bond rating agencies gave California's first sale of deficit bonds a single-A and two double-A scores. By comparison, the state's most recent sale of general obligation bonds was rated slightly lower at triple-B.

George von Zedlitz, senior vice president for fixed-income sales for Charles Schwab Investment Management, said the new ratings were key in selling the deficit bonds to his retail clients, who are mostly in California and looking for tax-free investments.

"California has really high tax rates," von Zedlitz said. Because of this, the deficit bonds "attract high-wealth individuals," he added.

Lloyd, of the treasurer's office, said that on Monday, investor demand was so great that the state's sale of bonds with lower maturities was "oversubscribed," meaning there were more orders for the bonds than there were available bonds. Yields for the first three years of maturity range from 1.93 percent to 2.88 percent.

She added that because the demand was so high, the yields for the early maturing bonds will likely come down before prices are set on Wednesday.

Investors are closely watching today's meeting of the Federal Reserve Bank's interest rate setting committee. The committee is not expected to raise rates, but the prospect could mean the state would have to spend more to sell the bonds.

"That could throw everything out of whack," said von Zedlitz.