On April 22, California State Treasurer, Bill Lockyer, released the banks’ responses to his March 29 request for data concerning these banks’ activities in the credit default swap (CDS) market in connection with or relating to the State of California general obligation (GO) bond offerings.
According to Lockyer’s press release, the information provided by the banks was analyzed by experts in Lockyer’s office and outside financial advisers. Based on that analysis, Lockyer has reached some preliminary conclusions about the banks’ trading of CDS on California GO bonds, and the effect of that activity on taxpayers’ borrowing costs on the bonds — essentially, that conclusions is this: The CDS trading’s effect on bond prices is not significant enough to cause concern at this time, and more information is being requested.
Lockyer also announced that his office will require all 86 firms in the State’s bond underwriter pool to file quarterly reports that provide detailed information on each firm’s CDS market activity, and that he is pushing Congress to adopt rules to regulate the CDS market.
If you would like a copy of each bank’s response, or have questions about the credit default swap market or the municipal bond market, contact Jeffrey Wittenberg at (877) 352-2010.
If you would like to discuss any aspect of the Treasurer’s action, contact Jeffrey Wittenberg at (877) 352-2010.