Misery for municipals

A year on from the collapse of the auction rate securities market, short-term variable-rate financing in the US remains scarce. In 2009, municipal issuers face surging costs and low interest rates most can't access. By Peter Madigan

The US municipal market endured a tumultuous 2008. The downgrades of many of the leading monoline insurance companies in late 2007 and early 2008 triggered an investor exodus from variable-rate demand notes (VRDNs), along with the implosion of the auction rate securities (ARSs) market last February. The situation was worsened by the exit of Bear Stearns last March, the collapse of Lehman Brothers in September and the withdrawal of several dealers from the municipal market, severely restricting