CORRECTED-If it's Tuesday, U.S. muni market traders are busy -report

Wed Aug 7, 2013 9:49am EDT

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(Corrects to trillion from billion in first paragraph)

NEW YORK Aug 6 (Reuters) - In the $3.7 trillion U.S. municipal bond market, the largest price movements take place on Tuesdays when traders are preparing portfolios for new bond sales, according to recent research by Municipal Market data.

Price movements in municipal bond prices are on average larger on Tuesday than on any other day of the week, said Daniel Berger, analyst at MMD, a unit of Thomson Reuters.

Considering a data set of more than six years, Berger showed that on average yields, which move inversely to prices, have increased or decreased the most on Tuesdays in 44 percent of cases. In the remaining cases the highest movements were spread out among other days of the week, with higher concentrations on Mondays and Fridays.

"In bull markets buying on Tuesday morning will lead to underperformance, while in bear markets Tuesday bond purchasers should experience outperformance," Berger said. He said hedge funds and others can create buying programs to take advantage of this activity. (Reporting by Tiziana Barghini)

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