The value of secondary-market insurance for New York City general obligation bonds has skyrocketed in the past two years, as seasoned investors have developed lucrative arbitraging strategies.

At the same time, the major bond insurers are carefully disbursing secondary-market insurance throughout the community, trying to avoid accusations of favoritism while simultaneously propping up the price of this now precious commodity. The buy side, as a result, eagerly awaits notices of capacity and seizes upon every drop.

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