Muni trading volume rises to $851.36 billion in Q3, MSRB says

By Angela McDaniels

Tacoma, Wash., Nov. 2 - Investors traded $851.36 billion principal amount of municipal securities during the third quarter, according to statistics released by the Municipal Securities Rulemaking Board on Wednesday.

The amount traded is the highest so far this year. Investors traded $842.09 billion in the first quarter and $818.91 billion in the second quarter.

However, the third-quarter figure is 8.5% lower than the $930.71 billion traded in the third quarter of 2010.

The total number of trades decreased to 2.45 million, the lowest number of trades in a quarter since the third quarter of 2008. Investors made 2.95 million in the first quarter of 2011 and 2.58 million trades in the second quarter.

The number of trades in the first quarter, however, was unusually high. In fact, it was the second highest recorded amount since the MSRB began collecting trading information.

Most active by amount

The top five most-active securities during the third quarter by par amount were

• The series 2011-12-A-1 revenue anticipation bonds due June 26, 2012 issued by the State of California. Investors traded $10.82 billion principal amount of these bonds in 6,408 trades;

• The series 2011A tax and revenue anticipation bonds due Aug. 30, 2012 issued by the State of Texas. Investors traded $6.71 billion principal amount of these bonds in 110 trades;

• The series A Exxon Mobil project revenue bonds due Aug. 1, 2035 issued by the East Baton Rouge Parish Industrial Development Board. Investors traded $6.13 billion principal amount of these bonds in 156 trades;

• The series B Exxon Mobil project revenue bonds due Dec. 1, 2040 issued by the East Baton Rouge Parish Industrial Development Board. Investors traded $3.13 billion principal amount of these bonds in 109 trades; and

• The series 2010 tax and revenue anticipation bonds due Aug. 31, 2011 issued by Texas. Investors traded $2.66 billion principal amount of these bonds in 94 trades.

The two Baton Rouge bonds have been in the top five in each quarter of 2011. In fact, the series B bonds were the most actively traded security of the first and second quarters. Investors traded $4.73 billion principal amount of these bonds in 83 trades in the first quarter and $5.28 billion principal amount of these bonds in 117 trades in the second quarter.

Most active by trades

The top five most-active securities during the third quarter by number of trades were

• California's series 2011-12-A-1 revenue anticipation bonds due June 26, 2012. As noted above, investors traded $10.82 billion principal amount of these bonds in 6,408 trades;

• The series 2005 Goldman Sachs headquarters issue of revenue bonds due Oct. 1, 2035 issued by the Liberty New York Development Corp. Investors traded $587.1 million principal amount of these bonds in 3,238 trades;

• The series 2011 general obligation public improvement bonds due July 1, 2041 issued by the Commonwealth of Puerto Rico. Investors traded $664.2 million principal amount of these bonds in 2,934 trades;

• The series R government facilities revenue bonds due July 1, 2028 issued by the Puerto Rico Public Buildings Authority. Investors traded $904.2 million principal amount of these bonds in 2,010 trades; and

• The series A revenue bonds due Feb. 15, 2047 issued by Hudson Yards Infrastructure Corp. Investors traded $129.7 million principal amount of these bonds in 1,549 trades.

None of these bonds were in the top five during the second quarter.

By number of trades, the most traded security in the first quarter was the City of Chicago's series C-1 taxable project bonds due Jan. 1, 2035. Investors traded $971.2 million principal amount of these bonds in 4,483 trades.

The most traded security in the second quarter was the State of Illinois' series 2003 taxable G.O. pension bonds due June 1, 2033. Investors traded $783.4 million principal amount of these bonds in 2,074 trades.

Trading activity

At $439.01 billion, customer purchases made up 51.6% of the trades made during the third quarter by par amount. They were followed by customer sales at 32.6% and inter-dealer trades at 15.8%.

Of the par amount traded, 47% was fixed rate and 41.3% was variable rate. By number of trades, however, 92.6% was fixed-rated.

The bulk of the par amount traded, 66.2%, was revenue bonds. G.O. bonds made up 21.3% of the trades by par amount.

The majority of the par amount traded, 82.6%, was tax exempt.

Daily averages by par amount

The average principal amount of securities traded each day was $13.3 billion in the third quarter, compared with $13 billion in the first quarter and $13.58 billion in the second quarter.

MSRB said customer buying activity decreased to an average daily par amount of $6.86 billion in the third quarter, compared with $7.55 billion in the same period last year.

Customer sales averaged $4.34 billion per day in the third quarter, and inter-dealer trades averaged $2.1 billion.

Of the $13.2 billion average amount traded each day, $9.61 billion was traded in amounts of more than $2 million, the most of any category.

By source of repayment, an average of $2.84 billion of G.O. bonds and $8.8 billion of revenue bonds traded each day.

By tax status, an average of $10.98 billion of tax-exempt securities, $959.7 million of taxable securities and $727.1 million of AMT securities traded each day.

Daily averages by trades

The average daily number of trades was 38,254 during the third quarter. The greatest amount of this average - 19,535 - was in the category of $25,000 or less.

MSRB said customer buying activity averaged 17,985 trades per day in the third quarter, inter-dealer trades averaged 12,054 and customer sales averaged 8,216.

By source of repayment, an average of 24,379 revenue bond trades and 12,585 G.O. bond trades were made each day.

By tax status, an average of 33,913 tax-exempt trades, 2,664 taxable trades and 1,640 AMT trades were made each day.

Sectors

By par amount, the most-traded sector was described as "other." The sector saw an average of $5.12 billion principal amount of municipals traded each day. It was followed by the education sector with $1.7 billion, the utility sector with $1.36 billion, the health sector with $1.2 billion and the various-purpose sector with $1.07 billion.

By trades, the most active sector was the "other" category with an average of 9,774 trades each day. It was followed by education with 8,678 trades, utility with 4,845 trades, various-purpose with 3,610 trades and health with 3,581 trades.

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