UBS To Ax Municipal Bond Unit

On the eve of an earnings call expected to reveal billions more in losses, Swiss banking behemoth UBS is gearing up to dump its municipal bond group.

“UBS intends to sell or eliminate its municipal security division,” said a UBS employee who declined to be named.

UBS (nyse: UBS - news - people )has taken $37 billion in subprime mortgage-related write-downs so far, and more bad news is expected Tuesday. It is believed the bank will announce another $12 billion in losses, as well as some 8,000 job cuts. The muni bond group appears to be the latest casualty.

The division, which employs roughly 300 people, works to match yield-hungry investors with bonds issued by states, cities and other government entities.

Selling or closing its muni division will generate some much-needed cash for UBS in the short term. But the company will lose exposure to a large and lucrative debt market. UBS was the third-biggest manager of muni issues in 2007, working on 614 issues with a total value $36.3 billion, according to Thomson Reuters.

According to UBS, there is roughly $2 trillion in outstanding debt on the municipal markets, with a million securities available from 50,000 different issuers.

UBS spokesperson Michelle Creden declined to comment when reached by phone Monday evening.