Derivatives Helped by Greater Acceptance, Standard Practices, Experts Say

Saskal, Rich
September 2004
Bond Buyer;9/15/2004, Vol. 349 Issue 31969, p3
Trade Publication
The article informs that derivatives have benefited from increased acceptance in the municipal bond market, as well as more standardized practices. The financial incentives for issuers to look at derivatives like interest-rate swaps are strong. An issuer might pay for a swap that hedges against interest rates fluctuations for a bond issue the issuer knows must come in the future, such as a current refunding. One of the biggest obstacles to such hedges is probably the political risk to issuer officials. The criticism they may face if the issuer has to pay to unwind a swap agreement probably far outweighs any credit they would receive if things work in the issuer's favor.


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