Banks are renewing billions of dollars in letters of credit for municipal bonds, relieving fears that issuers would struggle to refinance without the credit guarantees, the WSJ reports. Eighty-five per cent of the $13.5bn in letters of credit expiring in the first quarter were renewed or replaced, according to a Moody’s report. However, a further $50bn is set to expire in the second and third quarters, and banks are less willing to lend in the long term, the FT says. The large amount of expiring letters of credit is tied to the 2008 collapse of the market for auction-rate securities issued by municipalities, which forced issuers to sell variable-rate debt backed by credit enhancements instead. Read more