Strong demand from investors enabled the state to sell $100 million more of general obligation bonds than it anticipated in its offering yesterday.

The state said it sold $725.3 million of the bonds with an interest rate of 4.12 percent in what was the first general obligation bond sale this year by Hawai'i.

The state is selling bonds to help finance Gov. Linda Lingle's hoped-for plan of accelerating government building projects to boost the economy.

About $225.3 million of the proceeds will go to refund bonds issued at a higher interest rate, saving the state about $100 million in each of fiscal years 2010 and 2011.

The remainder of the proceeds will go to new capital improvement projects.

"The new money portion of the sale was increased in size to $500 million from the $400 million originally planned due to strong investor response and demand for the bonds," Georgina Kawamura, state director of finance, said in a press statement.

"The ability to sell the increased amount of bonds provided the state with an excellent opportunity to borrow additional funds at favorable interest rates."

The bonds carried investment-grade ratings from three ratings bureaus. Fitch Ratings affirmed its AA rating on Hawai'i debt, but downgraded its outlook to negative from stable, meaning it could lower its rating for the bonds in the future.

The state said that about $200 million of the bonds were sold to individual investors — mostly Hawai'i residents, who don't have to pay state income tax on the bonds' interest income.