Liquidity in the short-term market has dried up to the point where "there's pretty much a total lack" of banks willing to provide issuers with letters of credit or standby bond purchase facilities, the executive director of the Municipal Securities Rulemaking Board said yesterday.

Speaking at an Investment Company Institute conference in midtown Manhattan, Lynnette Hotchkiss said that the cost of liquidity facilities - which are purchased for some short-term instruments like variable-rate demand obligations - has become "prohibitive" for many issuers.

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