Citigroup Inc. has in recent weeks begun offering municipal securities data through its fixed-income portfolio analytics software called the Yield Book.
The muni data being used comes from Standard & Poor’s Securities DataManager service, which provides detailed descriptions and delivers intra-day updates on more than 1.8 million securities.
The Yield Book — which calculates yield, risk, and return measures — is used by institutional portfolio managers including investment advisers, insurance companies, banks, and hedge funds, in addition to Citigroup’s own trading, sales, and research staff. The software allows them to analyze their portfolios’ past and potential future performance.
However, details on individual securities, such as the coupon rate, final maturity, or call schedule, were previously provided only by Citigroup, which did not have its own data on municipal bonds that it was able to offer through the service. While the Yield Book did have the analytical tools to look at municipal securities, users previously had to enter details on those individual securities themselves, which could be a labor-intensive process.
Under the agreement with Standard & Poor’s, users of the Yield Book only need a Cusip number or other basic identifying characteristics to have those details included in the analysis of their portfolios.
Tom Klaffky, a managing director at Citigroup who oversees the Yield Book product, said the agreement with Standard & Poor’s to provide municipal securities data was sought to better serve Yield Book customers.
Klaffky said that users of the Yield Book had initially purchased the software primarily to track taxable bonds. Of the 400 institutional portfolio managers who use the Yield Book, Klaffky said he was not aware of any that used it solely for municipal bonds.
However, it eventually became apparent that many of those customers also had munis that they wanted to analyze as part of their portfolios, according to Klaffky.
“Something like 40% of our users were actually going through the trouble of doing this for their municipal holdings, so we said, ‘We’ll have to make this easier,’ ” Klaffky said.
“Some of the approaches that were really defined for the taxable market are now finding their way into the tax-exempt municipal market, like looking at things on an option-adjusted spread basis, or looking at effective durations, or looking at other kinds of risk management tools,” he added.
“I think that the demands of municipal managers have increased in terms of the level of sophistication they need to have to retain customers and win new customers,” Klaffky said. “I also think that what’s happening is many of them are rising to that occasion.”
