Credit & Risk

Seven Facts and Fiction about Auction Rate Securities

Seven Facts and Fiction about Auction Rate Securities

2 min readIntroduction Broker-dealers market Auction Rate Securities (ARS) to corporate clients as yieldier alternative investments to high-quality cash management vehicles. While the securities’ yield advantage over very short-duration (generally 28 or 35 days) bonds is possible, the brokers often fail to point out the price an investor pays in terms of liquidity given up, opportunities lost…