4 ms·
If they could cover their liabilities with their assets then they would sell the assets to do so. Clearly the assets do not cover the liabilities. It's not a le
by adam_arthur 4y ago
If they could cover their liabilities with their assets then they would sell the assets to do so. Clearly the assets do not cover the liabilities. It's not a lengthy process to sell a bond on the open market
- HWR_14 4y agoA T-bill is very liquid. Municipal bond liquidity dried up during the pandemic and, AFAIK, hasn't fully recovered yet. Obviously some assets they hold (mortgage backed securities) have declined in value.
- adam_arthur 4y agoMunis are liquid, I view (a slice of) the market every day. Volume is down, but not significantly: https://www.sifma.org/resources/research/us-municipal-bonds-statistics/ https://www.sifma.org/resources/research/us-municipal-bonds-... If you bought them at 2-3% yields then you lost a lot of money, which is probably the case here. If they bought below par they would get their money back at maturity, but that could be 20-30 years from now. Despite being "safe" from a credit perspective, munis are not safe from interest rate risk
- HWR_14 4y agoSorry, you're right that their assets are also down. I didn't mean to deny that. It just seems that it was more a liquidity crunch than a solvency crunch. But maybe they cannot pay all their debtors?