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April 15, 2008

When Markets Go Away: The Auction-Rate Case

Worthwhile reminder in the continued collapse of the $330-billion auction-rate securities market that sometimes markets that fail for too long stay failed. That is more or less what is on the verge of happening in ARS, with this ceased market no longer supported by sell-side capital essentially becoming a joke, with failures rates sitting north of 60% since February.

Bloomberg cites Citi coming to the same conclusion today, and ends with the quote of the day:

As with structured investment vehicles, "the liquidity providers were unwilling to provide liquidity,'' Citigroup said.

You said it, Citi. Nothing worse than when liquidity providers don't, you know .. provide.

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