Muni bonds flee auction-rate securities

Municipal borrowers plan to pull at least $21 billion of bonds out of auction rate securities by May 1, Bloomberg reports.
MAR 21, 2008
By  Bloomberg
Municipal borrowers plan to pull at least $21 billion of bonds out of auction rate securities by May 1 as part of an effort to escape soaring costs, according a Bloomberg report. The amount is more than what was sold in any year before 2002, according to data compiled by Bloomberg. About 69% of auctions in a market that also includes debt of student lenders and closed-end mutual funds failed to attract enough buyers this week, resulting in interest rates as high as 14%, according to the report. Rates are determined through a bidding process managed by banks typically every 7, 28 and 35 days. The average rate on long-term bonds with rates determined at auctions every seven days was 6.41% as of March 12, based on public data from the Securities Industry and Financial Management Association. That rate is down from a record 6.89% in February, but is still higher than every other reading in the two-year-old index that averaged 3.6% through January of this year, the report stated. The use of auction bonds by states, cities and other municipal borrowers grew in 2002, when sales doubled to $25 billion from $12 billion the previous year, according to data compiled by Thomson Financial. Sales peaked at $42 billion in 2004 before falling to $39 billion in 2007.

Latest News

NASAA moves to let state RIAs use client testimonials, aligning with SEC rule
NASAA moves to let state RIAs use client testimonials, aligning with SEC rule

A new proposal could end the ban on promoting client reviews in states like California and Connecticut, giving state-registered advisors a level playing field with their SEC-registered peers.

Could 401(k) plan participants gain from guided personalization?
Could 401(k) plan participants gain from guided personalization?

Morningstar research data show improved retirement trajectories for self-directors and allocators placed in managed accounts.

UBS sees a net loss of 111 financial advisors in the Americas during the second quarter
UBS sees a net loss of 111 financial advisors in the Americas during the second quarter

Some in the industry say that more UBS financial advisors this year will be heading for the exits.

JPMorgan reopens fight with fintechs, crypto over fees for customer data
JPMorgan reopens fight with fintechs, crypto over fees for customer data

The Wall Street giant has blasted data middlemen as digital freeloaders, but tech firms and consumer advocates are pushing back.

The average retiree is facing $173K in health care costs, Fidelity says
The average retiree is facing $173K in health care costs, Fidelity says

Research reveals a 4% year-on-year increase in expenses that one in five Americans, including one-quarter of Gen Xers, say they have not planned for.

SPONSORED How advisors can build for high-net-worth complexity

Orion's Tom Wilson on delivering coordinated, high-touch service in a world where returns alone no longer set you apart.

SPONSORED RILAs bring stability, growth during volatile markets

Barely a decade old, registered index-linked annuities have quickly surged in popularity, thanks to their unique blend of protection and growth potential—an appealing option for investors looking to chart a steadier course through today's choppy market waters, says Myles Lambert, Brighthouse Financial.