Wednesday, June 4, 2008

Auction Rate Securities Hell

Funds seek to break the ARS deadlock

Fund managers are seeking regulatory approval for a new type of security in an attempt to break the deadlock in parts of the $300bn auction rate securities market, which collapsed four months ago. The new security has been devised by closed-end fund managers, which in the past have issued more than $60bn in auction rate preferred shares (ARPs) and are facing complaints from investors who cannot trade them. The auction rate securities issued by closed-end funds are referred to as auction rate preferred shares, but have the same structure.

Posted by lvmreader @ 04:08 PM (673 views)
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2 thoughts on “Auction Rate Securities Hell

  • mark wadsworth says:

    ARS? That’s one well-thought-out acronym.

    A bit like the gummint’s Alcohol Harm Reduction Strategy (I’m not making this up)

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  • What this has got to do with House Prices

    Many municipalities (cities and towns) in the USA and Australia depend on Municipal Bonds to pay for services (state employees’ salaries, street cleaning, sewers etc). These states had relied on increasing house values to make their municipal bond repayments, but since the crash (a secondary effect), many cannot.

    Resultingly, the market sensed that it was pointless to keep lending money to municipalities.

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