Fed report puts municipal market at $3.71 trillion in third quarter

By Angela McDaniels

Tacoma, Wash., Dec. 10 – The total amount of municipal securities and loans outstanding was flat at $3.71 trillion at the end of the third quarter, according to the Z.1 flow and outstandings report released by the Federal Reserve on Thursday.

The amount outstanding has now bounced back to the same level seen roughly three years ago. From $3.71 trillion at the end of 2012, the figure had declined to a low of $3.63 trillion at the end of the third quarter of 2014 before gradually rising to $3.71 trillion at the end of the second quarter of this year.

Of the $3.71 trillion outstanding at quarter’s end, the majority, $2.96 trillion, was issued by state and local governments, followed by $536.5 billion issued by non-financial corporate business and $217.2 billion issued by non-profit organizations.

On the buyside, the household sector held $1.55 trillion of the securities outstanding at the end of the third quarter. Rounding out the top five were mutual funds with $687.5 billion, U.S.-chartered depository institutions with $488.1 billion, property-casualty insurance companies with $322.3 billion and money market mutual funds with $256.7 billion.

On a year-over-year basis, the amount of securities held increased for mutual funds (up 6.9%) and U.S.-chartered depository institutions (up 10.8%), decreased for money market mutual funds (down 7.9%) and was flat for the household sector and property-casualty insurance companies.

Flows increase $50.7 billion

On a seasonally adjusted annualized and net basis, total liabilities in the municipals market increased by $50.7 billion during the third quarter, according to the report.

In contrast, net liabilities decreased by $58.4 billion in the third quarter of last year.

The latest quarter’s $50.7 billion increase was driven by a $51.8 billion increase for state and local governments and an $8.7 billion increase for non-financial corporate businesses, offset by a $9.9 billion decrease for non-profit organizations.

In comparison, liabilities increased by $325.6 billion for agency- and government-sponsored enterprise-backed securities, $128.1 billion for corporate and foreign bonds and $24.5 billion for Treasuries during the third quarter on a seasonally adjusted annual basis.

On the buyside, municipals held by U.S.-chartered depository institutions increased by $35.1 billion on a seasonally adjusted annual basis. Mutual funds notched an increase of $17.2 billion, and the household sector increased its holdings by $11.7 billion.

Broker-dealers and money market mutual funds posted net decreases of $12.3 billion and $7.5 billion, respectively.

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