Issuers and industry officials yesterday said they are disconcerted about a "disconnect" between the high rates issuers are paying for variable-rate demand obligations that have become bank bonds, and the low rates banks are receiving on loans from the Federal Reserve after using the bonds for collateral.

They voiced their concerns at the Securities Industry and Financial Markets Association's Municipal Bond Summit in New York as dealers said they are coming out with new products to address the VRDO problem for issuers.

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