Lehman debuts muni index swap

Lehman Brothers Holdings Inc. today launched the Lehman Brothers Municipal Index Swap, according to published reports. The new product allows investors to bet on U.S. municipal bonds, taking positions on yields of new five- and 10-year swap indexes, without actually owning the bonds themselves. Lehman will only use general obligation bonds rated “Aa3,” “AA-minus” or higher, Bloomberg said. Only bonds from deals of at least $75 million can be included in the index, and each issuer cannot represent more than 10% of an index, Reuters said. Currently, investors use the Securities Industry and Financial Markets Association Municipal Swap Index or the Municipal Market Data Index from Thomson Financial.