Thursday, February 14, 2008
Auction-rate bonds are longterm bonds with interest rates reset regularly at monthly auctions. For over 20 years they were regarded as cashlike investments because of their liquidity, but with a higher rate of return than money market funds, and used to fund college loan programs and municipal building projects. With the credit crunch, auction bonds become the latest form of exotic security to go south, and unhappy investors are left with illiquid securities of uncertain value. Some are seeking redress from their brokers, as the Wall St. Journal recounts in today's page-one story. WSJ, Debt Crisis Hits a Dynasty.