Advisories

What was pledged by supporters a few weeks ago as a situation that could "never" occur seems almost like old news today: Auction Rate Securities of all forms are failing at a daily rate between 70 to 80 percent or between $15 to 25 billion.

In the world of corporate cash management investments, there is the $260 billion1 auction rate securities (ARS) market, and there is everything else.

In our advisory letter dated April, 2005 and titled Auction Rate Securities, we highlighted several factors that had prompted us to scrutinize the auction rate securities (ARS) market and its suitability for investors with liquidity and capital preservation as key elements of their investment objectives. We are providing this analysis as an update to our previous advisory.

This is an update to a prior research note on Auction Rate Securities (ARS) in which we expressed some concerns over a weakening liquidity dynamic in this $210 billion market.

Following the launch of an SEC investigation into the $210 billion auction-rate bond market last month, SVB Asset Management and our clients have experienced a significant increase in the calls from dealers selling auction-rate bonds.