While mutual fund executives and analysts warned earlier this year that some of the holdings of stable-value funds were questionable and that they were in danger of breaking the buck, that no longer appears to be true, The Wall Street Journal reports.
The problem lay in the fact that stable-value funds invest in both highly rated corporate debt and highly rated structured instruments, including asset-backed securities. But with the failure of so many mortgages and structured vehicles, few insurers were willing to provide the wrappers guaranteeing these holdings.
With the credit markets more stable and the market value of these funds’ holdings closer to their book value, insurers are, once again, willing to provide the wrappers, but at a higher cost.
