Fed report puts municipals market at $3.71 trillion at end of 2012

By Angela McDaniels

Tacoma, Wash., March 7 - The total amount of municipal securities and loans outstanding decreased slightly to $3.71 trillion at the end of the fourth quarter from $3.72 trillion at the end of the third quarter, according to the Z.1 flow and outstandings report released by the Federal Reserve on Thursday.

In comparison, the amount outstanding was $3.72 trillion at the end of 2011, $3.77 trillion at the end of 2010, $3.67 trillion at the end of 2009 and $3.52 trillion at the end of 2008.

Of the $3.71 trillion outstanding at the quarter's end, the majority - $2.96 trillion - was issued by state and local governments, followed by $509.1 billion issued by non-financial corporate businesses and $241.0 billion issued by non-profit organizations.

On the buyside, the household sector held $1.68 trillion of the securities outstanding at the end of the fourth quarter, followed by mutual funds with $628 billion, U.S.-chartered depository institutions with $363.1 billion, money market mutual funds with $336.7 billion and property-casualty insurance companies with $329 billion.

On a year-over-year basis, the amount of securities held increased for U.S.-chartered depository institutions (up 22.1%) and mutual funds (up 16.0%). The amount fell 7.4% for the household sector, fell 5.8% for money market mutual funds and was flat for property-casualty insurance companies.

Flows fall by $125.4 billion

On a seasonally adjusted annualized and net basis, total liabilities in the municipals market declined by $125.4 billion during the fourth quarter of 2012, according to the report.

The large decline was balanced against a $109.7 billion increase in the second quarter. As a result, the decline for the full year was only $4.9 billion.

This is the second year of declines. The amount of liabilities outstanding fell by $52.8 billion in 2011. This followed three years of increases: a $99.7 billion increase in 2010, a $155.3 billion increase in 2009 and a $92.4 billion increase in 2008.

The fourth quarter's $125.4 billion decline was driven by a $110.7 billion decline for state and local governments and an $18.5 billion decline for non-profit organizations. Non-financial corporate businesses saw a $3.8 billion increase.

In comparison, liabilities increased by $1.26 trillion for Treasuries, increased by $23.7 billion for agencies and increased by $719.1 billion for corporate and foreign bonds in the fourth quarter on a seasonally adjusted annual basis.

On the buyside, municipals held by the household sector fell by $238.1 billion on a seasonally adjusted annual basis. Brokers and dealers reduced their holdings by $9.6 billion, and non-financial corporate businesses notched a decline of $7.2 billion.

Mutual funds, U.S.-chartered depository institutions and money market mutual funds posted net increases of $69.9 billion, $44.4 billion and $19.5 billion, respectively.

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