WASHINGTON — Despite an uptick in municipal bond trading during the first quarter of 2012, trading remains below levels seen in the same periods during 2010 and 2011, according to a quarterly statistics report released on Thursday by the Municipal Securities Rulemaking Board.
The board’s report also noted that the number of disclosure notices submitted during the period jumped by double-digits.
Between January and March, $791.7 billion in par value traded hands, a 3.4% increase from the roughly $766 billion in par that traded during the fourth quarter of 2011.
The amount of par traded during the quarter slipped 6% compared to the same period in 2011, when $842.1 billion in par traded, and 13% from the first quarter of 2010, when $915.2 billion in par traded, according to MSRB data.
The board’s quarterly statistics report showed that investors conducted 2.42 million trades during the period, a drop of nearly 18% from the first quarter of 2011.
During the most recent quarter, $492.3 billion of revenue bond par changed hands in some 1.5 million transactions, and $196.8 billion in general obligation par was traded in a total of 833,623 transactions.
Changes in the variable-rate securities market were deemed to be responsible for much of the decline in year-over-year trading.
The amount of variable-rate debt traded during the period fell 9%, from $315.7 billion in the first quarter of 2011 to $287.3 billion.
The decline didn’t surprise Michael Decker, managing director and co-head of municipal securities at the Securities Industry and Financial Markets Association.
Decker noted that variable-rate bonds, attractive with issuers in the years leading up to the recession, have lost much of their favor.
He called the decline in trading of variable-rate par “emblematic of the fact that the variable-rate market is much smaller than it was, and that it continues to shrink.”
Decker added that the decline in trading activity last quarter compared to the first quarter of 2011 likely reflected the expiration of the Build America Bonds program at the end of 2010.
The pending expiration resulted in a surge of BAB issuance as 2010 drew to a close and trading in the bonds carried over into the secondary market early in the new year.
“Some trading in first quarter of 2011 was attributed to a rush to market. So, part of the overall drop in trading volume might be attributed to the fact that we didn’t have the big spike of issues at the end of 2011,” Decker said.
The Municipal Securities Rulemaking Board said trades of $100,000 or less accounted for about 7% of all the par traded during the quarter, down from 8.6% during the first quarter of 2011.
Traders bought or sold $4.1 billion of revenue bonds issued by the Parish of East Baton Rouge Industrial Development Board in Louisiana, making those bonds the heaviest traded in the first quarter in terms of par value.
The most actively traded were revenue notes issued by the Puerto Rico Aqueduct and Sewer Authority, which traded 7,964 times during the quarter.
Despite declines in year-over-year trading, the number of continuing disclosure notices submitted to the MSRB from issuers jumped to 39,549 in the first quarter, an 8% increase from the same period in 2011, and a 17% jump from the first quarter of 2010.
The disclosures include more than 11,000 bond calls, nearly 10,000 notices announcing availability of audited financial statements, and nearly 9,000 submissions of annual financial information and operating data.
