Dexia isn’t just a Franco-Belgian basket case; it’s your basket case too. And since there’s been a bit of talk about the link between the bank and the US muni market here’s our quick take.
As the FT’s Nicole Bullock reminds us, the bank is — or at least was — intimately involved with the municipal bond market. Read more
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
Here’s a novel idea for municipalities: ignore the prickly muni bond market and accept help from your local Wall St bank.
From the WSJ on Wednesday: Read more