Muni Crisis

We have a G** D*** crisis in the debt markets. Nothing short. If local and state governments cannot raise money and or refinance existing debt you better watch out. This is a serious mess that has the potential to make the mortgage "crisis" look like child's play. Just read this blurb on FT.com at this link.

Jeffrey Rosenberg, head of credit strategy at Banc of America Securities said: ”Failures in the auction rate securities market accelerated – on Wednesday – with an estimated 80 per cent of all auctions failing.”

He said: “With a total size of $330bn and roughly half of that held by individuals, a significant, albeit likely short lived liquidity crunch is again emanating out of the credit markets.”

”This is not a credit issue, but one of liquidity,” said Alex Roever, fixed income strategist at JPMorgan. ”Dealers hold more paper than they wish and there is a limit to how much they can hold. The investor base has backed away and in the absence of that support these auctions can not clear.”

”The auction rate securities market is unwinding and most of the market will enter a failed state. The lack of confidence is the contributing factor and there is a risk this type of structure will go away.”