PHOENIX - The Associated Press and Municipal Bond Information Services, a national consortium of municipal interdealer brokers, announced Monday that it has created a new muni bond index.
The AP Municipal Bond Index will be a service built on market data aggregated from the MBIS member firms. The AP and MBIS said in a statement that the index will be the “only benchmark based on observable, intraday pre-trade and trade data” and will be launched in the second half of 2016, with beta versions now available to limited market participants. Andrew Kalotay & Associates was hired to build the index calculation engine.
MBIS chief Ron Valinoti said that the new index would further the goal of market transparency, a key objective of muni market regulators. The MBIS was formed by its members in response to the Securities and Exchange Commission’s 2012 Report on the Municipal Market, a major regulatory development in which the commission found and recommended various steps to counter a lack of transparency in the retail investor-dominated muni market. The Municipal Securities Rulemaking Board has been focused on market transparency since that time, especially on the issue of undisclosed markups charged to retail investors.
"As regulators have noted, the currently available muni-bond benchmarks are based on subjectively based survey-driven methodologies, rather than independently aggregated market data and a rules-based system," said Valinoti. "The AP Municipal Bond Index will bring much needed transparency to the muni market."
Evan Bergstrom, MBIS' product manager, added, "The underlying market data used to build our benchmark yield curve can be used by financial institutions to gain real insight into the municipal bond market activity and market direction."
AP leadership trumpeted the potential of the new index to provide smaller investors with a more easily-understood look at the market.
"Providing information and insight has always been part of the AP's mission," said AP vice president of business development Fernando Ferre. "And the index we have built does just that: providing an objective, understandable snapshot of an important market to many consumer-level investors.”
The service will create a unique “common touchstone” for ordinary investors by providing intraday, objective "snapshots" of the market that haven’t historically been available to the public, the statement said.
Bruce Glover, AP director of business development, data and finance, said that the combination of AP and MBIS expertise will benefit the muni space.
"The combination of MBIS' market expertise with AP reporting has resulted in a widely beneficial service, increasing awareness and understanding of the municipal bond markets," he said.
