The ongoing distress in capital markets has had a profound impact on municipalities that have traditionally relied on short-term funding in the auction-rate market. As liquidity has been at a premium, auctions for short-term securities have failed, resulting in substantial increases in interest rates on auction-rate debt.
The Pioneer Press reports that Piper Jaffray appears to be moving toward purchasing such debt from their clients. While specific details of their purchase plan have not been made public, the move should be well received, both by investment banking and brokerage clients:
“The reality is, if I am a municipal client of Piper Jaffray and they come to me and offer to take down my auction-rate securities at a level that is better than the market will pay, I am very happy with them,” Kragenbring said. “They would certainly be rare in being a broker-dealer willing to absorb their clients’ pain.”