California Stops Insuring State's Municipal Bonds

[Silverbird]

[California sez, we don't get no assurance from your insurance]

CNBC The country's largest issuer of municipal bonds, the state of California, has decided to stop using municipal-bond insurance, a huge blow to the struggling industry, CNBC has learned.

"In the current market--and given the condition of the bond insurers--it makes no sense," Tom Dresslar, the Director of Communication for California State Treasurers Office, told CNBC. "There's no value to the taxpayer."

http://www.cnbc.com/id/23455044

 

[Silverbird]

Aha, this is why they could get away with thumbing their nose at the insurers:

Pimco's Gross Buys $1.5 Billion in Muni Bonds (Reuters)
Bond fund manager Bill Gross on Tuesday said he had bought $1.5 billion of municipal bonds on Friday at what he called "very attractive" prices that have risen "substantially" since then.....

Short-term borrowing costs have spiked as investors unloaded paper backed by troubled bond insurers, swamping dealers. And the value of long-term municipal bonds plunged as investors fled debt that was seen as tainted because it was backed by an insurer no longer deemed credit-worthy because of its expansion into the subprime mortgage sector......

California on Monday sold 70 percent of the $1.75 billion of bonds it is selling to individuals, an extraordinarily high amount.
http://www.cnbc.com/id/23465456