March 7 (Bloomberg) -- EFG International, the Swiss private bank founded by the late Greek shipping tycoon John Latsis, fell in Zurich trading after some clients lost money when the company liquidated a U.S. municipal bond.

The bond product, known as Akos, was issued in November 2004 and ``until last week traded within sustainable parameters,'' EFG spokesman Keith Gapp said today by telephone. A selloff in the market meant the fund was liquidated and some institutional clients incurred a loss, Gapp said.

EFG fell 2.35 Swiss francs, or 6.4 percent, to 34.5.

Debt sold by states and local governments in the U.S. had the worst monthly slump in at least 19 years in February. Municipal bonds fell 4.9 percent last month, according to a Merrill Lynch & Co. index, as waning investor demand for insured debt led to record failures in the auction-rate securities market and rising yields on variable-rate debt.

``EFG International had no exposure on its own account, and will therefore not have to write down the value of any assets,'' the bank said in an e-mailed statement.

EFG, which reported a 48 percent gain in 2007 profit last month, said it raised $210 million for Akos, out of a total of $600 million. The Zurich-based private bank is offering clients that invested in the bond a certificate that will allow them to ``recoup value'' once the market ``returns to more rational levels,'' Gapp said.

The loss was first reported today by Swedish financial Web site Placera Nu, citing a letter sent from the bank to its customers. Swedish municipalities and church groups are likely to be among the clients who have lost money, Placera Nu said.

Declines in the municipal bond market accelerated at the end of February on selling by hedge funds squeezed by rising floating rates on notes they issued and declining values on long-term bonds used as collateral.

To contact the reporter on this story: Warren Giles in Geneva at wgiles@bloomberg.net

Last Updated: March 7, 2008 11:35 EST