Radical Guide to Online Bond Investing: Tip: Check Municipal Bond Trade Reports

You only need to go to one website for the free and publicly available trade information on municipal bonds:  www.investinginbonds.com.  From there, you’ll see the tab “Municipal Market At-A-Glance.”  Click on this tab to begin the trade report search.

For municipal bonds, trade reports are disseminated by the Municipal Securities Rulemaking Board (aka MSRB).  Given one million separate municipal bond issues, the MSRB trade reporting is a Herculean and commendable data delivery task.

To add to this task, in January 2005, MSRB required that municipal dealers must submit trade information within 15 minutes of the trade.  (Before, dealers had to submit the information within a day of the trade).  You can see fresh, up-to-date trade information on many municipal bond trades.  

Once you’ve arrived at the reports screen, you can begin to search the reports.  Here are some tips on the municipal bond trade reports:

  • You should search for a single bond using the CUSIP identifier, whenever possible.  It is the quickest way to zero in on your bond among all the trade reports. 
  • Other than CUSIP number, you can search (in order of importance) with state, issuer, maturity and rating variables.  They are all there and can return to you a number of comparable bonds. (In the canned searches, searching by “state” dominates all others.  The emphasis on “state” makes sense in light of the unique tax benefits of municipal bonds defined by state boundaries).
  • Your bond will likely have its largest trading volume within days of its issuance into the market.
  • A seasoned bond may have not traded for months.  After all, only 1 in 3 municipal bonds trades in any given year.  Still, using the search engine, you should be able to find good proxies, namely, similar bonds with similar credits that have traded.
  • You should focus on trades marked “Sale to Customer” or “Purchase from Customer,” both described from the dealer’s perspective.  So if you’re buying, look at the “Sale to Customer” trades.  Look at “Purchase from Customer” if you’re selling. Also, trades masked with a size of “1MM+” are clearly institutional.  Most retail trades are safely inside $50K in size.
  • You won’t see a dealer’s name attached to any trade.  If you like the all-in price, you will not be able to phone up that dealer to get the same level.  The regulators can find out the names of the dealers involved in any trade; a retail investor can’t.  

Keep in mind that the data are littered with clerical errors.  Some may be big, others small.  MSRB will not correct the data, too.  So you are seeing what the trading dealers provide, replete with errors and misinformation.

It took MSRB ten years to arrive at real-time pricing.  It’s not hard to imagine the dealer community’s unhappiness over trade reporting.  Trade reporting had to be a give-up game.  Because dealers show more of the action, investors will come away with more confidence in their market.

We turn next to the trade reporting for corporate bonds.

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June 3, 2005 | Permalink


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