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U.S. municipal bond trading dipped in 2012
February 28, 2013 / 3:25 PM / 5 years ago

U.S. municipal bond trading dipped in 2012

WASHINGTON, Feb 28 (Reuters) - Trading in U.S. municipal bonds dipped last year as appetite for revenue bonds faded for a second year in a row, according to data released on Thursday by the Municipal Securities Rulemaking Board.

Altogether, $3.23 trillion in bonds was traded in 2012, compared with $3.29 trillion in 2011. Both totals marked a major drop from previous years - $3.75 trillion were traded in 2010 and $3.8 trillion in 2009, MSRB said.

The MSRB, a self regulatory organization, wrote in its year-end report that revenue bonds make up a little less than two-thirds of trades, when measured by par amount, on average, and in 2012 $2.11 trillion was bought and sold. That compares to $2.12 trillion in 2011 and $2.5 trillion in 2010.

General obligation debt, meanwhile, rose to $731.5 billion trades from $704.03 billion in 2011.

The $3.7 trillion municipal bond market is largely considered “buy and hold.” Of the trade types, $1.62 trillion were customers buying debt, nearly twice the $975 billion of customers selling debt. Both were slightly below 2011’s buys of $1.67 trillion and sales of $1.09 trillion. Inter-dealer trades, meanwhile, rose to $630.55 billion from $526.3 billion in 2011.

In 2012, an average bond was traded 1.57 million times within a month of issuance. Three to six months from issuance, it was traded just 232,744 times. A year to 18 months out the number of trades averaged 307,877.

When measured by the number of trades, total activity dropped in 2012 as well, with 9.71 million transactions compared to 10.4 million in 2011.

Bonds issued by Puerto Rico for general obligation, sewer and water, and revenues were the top four most actively traded securities in 2012, when measured by number of trades. Illinois was fifth.

When measured by par amount, variable-rate East Baton Rouge development bonds were the two most traded, followed by short term debt issued by California.

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