Auction rate securities unwinding explained

This interactive graphic explains how a dearth of liquidity and loss in confidence caused the collapse of the $330bn market and its impact on municipal bond issuers and investors.

The auction rate securities market, a $330bn slice of the municipal bond sector, in 2008 became a casualty of the credit crisis.

The market, heavily used by municipal borrowers and backed by triple-A rated guarantees from bond insurers, was used as a safe place for investors to park cash and earn slightly higher returns.

Fears that bond insurers will not be able to maintain their superior ratings led to numerous investors pulling out of the market. The failure of hundreds of auctions has left existing bondholders unable to sell and a few municipal bond issuers on the edge of bankruptcy.