The article mentions that some issuers want to be able to bid on their own bonds and I thought that was very odd until I remembered that if there aren't any bids, the bonds automatically reset to a MUCH higher interest rate.
Auction-Rate Bond Failures Approach 70%, Show No Sign of Easing
By Michael McDonald
March 5 (Bloomberg) -- Auction-rate bond failures show no sign of abating after investors abandoned the market for variable-rate municipal securities.
Almost 70 percent of the periodic auctions in the $330 billion market failed this week as investment banks stopped buying the securities investors didn't want. Yields on the debt averaged 6.52 percent as of Feb. 28, up from 3.63 percent before demand evaporated in January.
The market has collapsed because of subprime mortgage- linked losses investment banks face, not because municipalities will default, said Dexter Torres, a trader at fixed-income investment firm Samson Capital Advisors LLC in New York.
``It's still a liquidity issue, not a credit issue,'' Torres said.
Wednesday, March 05, 2008
Subscribe to:
Post Comments (Atom)
Posts
No comments:
Post a Comment