WASHINGTON - Morgan Stanley announced Monday it will refinance illiquid auction-rate preferred shares with tender options bonds, created from municipal securities in 10 of its closed-end municipal funds, to escape high interest rates and provide liquidity to its auction-rate securities investors.

The move represents a trend among close-end municipal funds: replace the high interest, auction-rate preferred shares the funds use for leverage with tender option bonds or variable-rate demand preferred shares.

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