Thought Leadership

Update: Municipal Auction Rate Securities Market and the Broad Market

March 7, 2008

Over the past few weeks, issuers and investors have been grappling with the volatility of the Municipal Auction Rate Securities (ARS) market.  Many issuers have had to deal with failed auctions and higher interest rates on debt that had previously provided them with an attractive cost of capital. Investors have been rewarded with higher yields while taking on liquidity risk.  Most recently, the trials and tribulations of the auction market have impacted the Variable Demand Rate Note (VRDNs) market and the municipal market in general.  In this piece, we will update you on the ARS market and give some insights on its impact on the VRDNs market and the general municipal market.