WASHINGTON - Municipal issuers of auction-rate bonds can convert to another interest-rate mode or remove bond insurance without a resulting reissuance of the bonds as long as those actions are permitted by the bond documents, the Treasury Department clarified in a notice released yesterday.

Notice 2008-27 comes as issuers of auction-rate bonds, which are typically insured, are considering converting to other interest-rate modes to avoid higher interest costs, as their bond insurers have experienced actual or threatened rating downgrades. In addition, auctions of these securities have been failing around the country for lack of sufficient investor interest.

Subscribe Now

Independent and authoritative analysis and perspective for the bond buying industry.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.