Analysis: Debt issuers may face permanently higher costs

09/22/2009 | Reuters

Many investors are prohibiting banks from reusing their assets after the collapse of Lehman Brothers caused substantial losses. The development will likely boost costs for debt issuers. "When securities are less available to freely circulate in the market, the liquidity of those securities goes down," said Darrell Duffie, a professor at Stanford University. "It's going to raise the cost of trading in corporate bonds and will lower the attractiveness of buying corporate bonds when they're issued, and that means the corporation will have to pay a higher interest rate."

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