When the auction-rate-securities market went into seizure in February and early March, it only added to the headaches of hedge funds operating in the municipal bond market, triggering prompt liquidations and $3 billion in losses.
Though hedge funds may not have had a large direct stake in the ARS market, the carryover effect from the meltdown caused such a downward spiral in muni prices that it gutted their value relative to taxable securities.
