“Since 2008 the amount of risk capital dedicated to municipals is down significantly. Banks’ proprietary traders as well as hedge funds are far less active than they were several years ago,” said Lee, suggesting a more open playing field for muni bond players.
“The separation of the different ratings was sort of painful for people who thought they owned AAA-rated bonds, but who subsequently owned A-rated securities,” Lee said. “However, there are many more trading opportunities because of the granularity in the ratings.”
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