AIG might sell off its vast portfolio of municipal bonds
AIG’s might sell off its vast portfolio of municipal bonds, according to AIG’s financial statements as of June 30, its portfolio of municipal bonds holdings totaled $46 billion. But with AIG’s fate still to be determined, traders fretted about whether the insurer might sell off its vast portfolio of municipal bonds.
The $2.6 trillion municipal bond market typically sees about $5 billion of new issuance a week and it is not uncommon for it to become illiquid when, for example, U.S. Treasury bonds have a rocky day.
Other U.S. municipal issuers, including US states, cities, hospitals, turnpikes, and museums, in recent years entered hundreds of billions of dollars of swap contracts with investment banks, including Lehman. This helped the tax-free issuers lock in favorable interest rates.
Tags: AIG, government bonds, municipal bonds, stocks, stocks and bonds, treasury bills, treasury bonds
