Bank regulators’ recent proposal to exclude municipal bonds from the standards for receiving HQLA status would impair Munis’ demand, notes Citi in its recent report.
George Friedlander and others at Citi Research believe a very strong case exists for including a very large proportion of investment grade municipals as HQLA. They believe municipal bonds should be given level 2A status in many cases and level 2B status in most other cases.
Several reasons for inclusion of Munis as HQLA
Recently, bank regulators proposed a set of standards that would, among other things, measure the extent to which bank holdings would meet certain standards as High Quality Liquid Assets.
According to Citi analysts, there are several compelling factors for inclusion of municipal bonds as...
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