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Son of LIBOR: Muni Market Eyes All-American Rate-Rigging Scandal

Aaron Task
Editor in Chief
Daily Ticker

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As the LIBOR scandal continues to encircle global banks, an All-American version of banks manipulating a key lending rate may be unfolding.

The municipal bond industry's self-regulator the Municipal Securities Rulemaking Board is "concerned about the transparency" of the Municipal Market Data (MMD), a benchmark rate for state and local government debt, The NY Times reports.

The MMD Index is owned and published by Thomson Reuters, which calculates the data based, in part, by surveying banks. As with LIBOR, the potential for manipulation is high.

"For years I have been hearing from bankers, usually underwriters, complaining about how the [MMD] scale is manipulated somehow," says one veteran muni bond market watcher.

According to The NYT, the Securities & Exchange Commission is expected to release a report soon on recommended reforms for the muni bond market.

Given the stress on local government budgets -- and the fact muni bonds are favorite investments of many individuals, especially retirees -- these allegations could lead to torrents of lawsuits and potential fines for any banks involved, especially if incriminating emails of MMD manipulation are unearthed.

Aaron Task is the host of The Daily Ticker. You can follow him on Twitter at @aarontask or email him at altask@yahoo.com

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