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Securities Law

Muni Trading Slips in Third Quarter

NOV 20, 2012 10:01pm ET
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WASHINGTON — Trading in the $3.7 trillion municipal securities market decreased again in the third quarter of 2012, driven largely by a continued decline in trading of variable-rate securities, according to market statistics released Nov. 20 by the Municipal Securities Rulemaking Board.

During the quarter ending in September, par amount of trades totaled $794.9 billion, down 6.1% from the previous quarter, when some $844 billion in par traded. Trading by par amount was off 6.7% from the same third quarter last year, when $851.4 billion in par changed hands.

During the most recent quarter there were 2.38 million trades, a decline of 2.9% from the same period last year. The decline reflected less trading in the variable-rate sector. The MSRB said par amount of variable-rate securities that traded fell to $291.7 billion, down 9% from the previous quarter and down 17% from the third quarter of 2011.

Trading of fixed-rate securities actually increased year-over-year in terms of par value, according to the MSRB.

The board said that in the third quarter $420.4 billion in fixed-rate par changed hands, up 5% from the same period last year, when $400.4 billion in fixed-rate par traded. But the number of trades for fixed-rate bonds fell to 2.2 million, down 6% from the previous quarter and down 3% from the year before.

There were 199,860 rate resets for variable-rate demand obligations during the period, down 10% from the third quarter of 2011. Rate resets for auction-rate securities also declined year-over-year, falling 17% to 4,720 resets.

The report said that revenue bonds accounted for 67% of traded par and 64% of the number of trades during the quarter. General obligation bonds accounted for 21% of the par traded and 32% of trades.

The MSRB said 50% of the par value traded was for customer purchases, a two-point drop year-over-year.

The report also noted an uptick in the number of continuing disclosure documents received by the board.

The MSRB said issuers filed 27,736 disclosures during the quarter, 9% more than the 25,362 received during the third quarter of 2011.

Compared to the same period last year, the board received 788 more audited financial statements, nearly 500 more disclosures of annual financial information and operating data, and 334 more disclosures of quarterly or monthly financial information. Also, issuers filed 402 more defeasance disclosures and 418 more bond call disclosures, but nearly 400 fewer rating change disclosures, compared to last year.

A California revenue anticipation note issue ranked first in the amount of par traded during the period, with roughly $12.7 billion in par exchanged in 4,230 transactions. Puerto Rico public improvement bonds traded the most frequently, changing hands 5,591 times.

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