The muni markets are getting into more trouble as each day passes.
According to Bloomberg "U.S. states and local governments may extend the worst slump in municipal bonds on record as they replace as much as $166 billion of auction-rate securities."
As the failure rate of auctions rises the terrible problems for cities, states, and other government authorities mount. The interest rates that must pay is, in many cases, spiking up sharply.
What is still not clear is whether the firms which had supported the auctions for over 25 years, companies like Merrill Lynch (NYSE: MER) and Citigroup (NYSE C) have any liabilities for abandoning the markets.
This may end up in the courts.
Douglas A. McIntyre
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