The fragmented nature of the municipal market means that a specific muni bond issue likely trades less frequently than similar corporate bonds and U.S. Treasuries. Investing in muni bonds that trade often provides investors better price transparency through recent trade data history, resulting in lower trading costs.
In this article, we examine some of the most active bonds traded over the month of September. FINRA requires mandatory reporting of over-the-counter trades for municipal bonds. This data provides investors a valuable opportunity to review the price and yield of how a specific bond has recently traded. Prior to FINRA reporting requirements, trading costs were much higher when dealers made markets with wider bid/ask spreads. The difference between where dealers bought bonds and sold bonds created additional costs for municipal investors. By considering bonds that trade more often, investors can reduce these embedded trading costs.
Keep our Glossary of Municipal Bond Terminologies handy to familiarize with different concepts commonly used by municipal investors.
Most Active Muni Bonds
The list below of the most active muni bonds is ranked by the number of trades rather than total trade volume to get a better gauge of how many times the bonds exchanged hands. Large institutional trades skew the ranking if they were based solely on volume. Some of the most recent active bonds happen to be from new municipal deals in recent months.
Be sure to visit our Market Activity Section here to explore recent muni bond trades.
|CUSIP||Bond||Maturity||No of Trades||Last Yield||Last Price||Volume (in thousands)||Rationale|
Texas St Tax And Revenue Anticipation Notes
|8/30/18||831.00||1.04%||$102.50||$1,050,610||The State of Texas issued these Tax and Revenue Anticipation notes in August to provide liquidity to the state’s General Revenue Fund. With a maturity in August 2018, muni investors can buy these as a short-term tax-exempt alternative to U.S. Treasury bills. The amount outstanding in this bond is $5.4 billion, so it’s no surprise that it’s one of the most actively traded bonds.|
New York City GO Bond
|10/01/42||765.00||3.29%||$98.38||$80,965||New York City issued $550 million Series B GO bonds in September with $37 million of that deal in the 2042 maturity. The bonds were issued for general capital purposes. New York City, like many other municipalities, is taking advantage of low interest rates by issuing long-term debt with lower coupons. These bonds have a coupon of just 3.25%, meaning their price will be more sensitive when interest rates rise. |
Click here to know how to measure interest rate sensitivity municipal bonds.
University of Texas Revenue Bond
|8/15/2044||506.00||3.40%||$100.97||$84,320||The University of Texas System issued $265 million in refunding notes in September. The bonds are supported by revenues generated from across the system including eight general academic institutions and six health institutions. |
Be sure to read this article to remain aware of the due diligence process for evaluating municipal bonds.
South Jersey Port Corporation Taxable Bond
|1/1/2040||435.00||6.52%||$115.53||$13,910||These Build America Taxable Bonds were issued in 2009. The maturity size is quite large for a municipal bond at $84.8 million, which creates an opportunity for higher trade volume. The bonds are rated Baa1 by Moody’s and BBB- by S&P, which is fairly low by municipal bond standards. The long maturity date also makes the bonds more risky as shifts in interest rates cause larger movements in the bond’s price. This could explain why the bonds are one of the most frequently traded, as short-term traders take advantage of swings in long-term rates. |
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Metropolitan Atlanta Rapid Transit System Sales Tax Revenue Bond
|7/1/2039||429.00||3.32%||$98.37||$28,910||The Metropolitan Atlanta Rapid Transit System, or MARTA, provides rail and bus services to the Atlanta metro area. The system provided service to over 133 million passengers in 2016. The bonds are supported through the collection of sales taxes.|
The Bottom Line
The most actively traded bonds tend to be from recent new issue deals as initial buyers may look to quickly turn a profit by selling the bonds within weeks of buying them. Bond maturities with a large size, such as the ones from South Jersey Port Corporation, also tend to be more actively traded. Municipal bonds that trade more frequently are easier to price because of the availability of trade data, which eventually helps investors get the best execution on their trades.
Check out the different ways to invest in muni bonds to stay up to date with the current investment strategies.