Financial guarrantors and the 2007-2009 credit crisis
By: Daniel Bergstresser, Randolph Cohen, Siddharth Shenai
Contributors: Cohen, Randolph B.; Shenai, Siddharth; Harvard Business School
Series: Working paper / Harvard Business School -- 11-051; Working paper (Harvard Business School) -- 11-051.
Publisher: Harvard Business School
Published: 2010
Place of publication: [Boston]
Language: eng
Number of pages: 60
Description: More than half of the municipal bonds issued between 1995 and 2009 were sold with bond insurance. During the credit crisis the perceived credit quality of the financial guarantors fell, and yields on insured bonds exceeded yields on equivalent uninsured issues. It does not appear that either property and casualty insurers or open-end municipal mutual funds were dumping insured bonds; analysis of holdings data indicates that their propensity to sell bonds was unusually low for the issues insured by troubled insurers. At least on a bond-by-bond basis, the yield inversion phenomenon is also not explained by the rapid liquidation of Tender Option Bond (TOB) programs, which disproportionately held insured issues. Finally, during the recent crisis the insured bonds have become significantly less liquid than uninsured municipal debt.
Notes: "November 2010"--Publisher's website.

"First version January 2010, this version November 2010"--p. 1.

Includes bibliographical references.