JPMorgan and Charles Schwab have extended an agreement to provide Schwab's clients with access to municipal bonds underwritten by JPMorgan.
The deal authorizes Schwab's retail clients to invest in primary and secondary municipal bond and corporate debt securities underwritten by JPMorgan, the companies said in a joint press release Friday. The agreement was originally made in 2010.
Reinstating the agreement means Schwab's 8,000 independent financial advisors will have access to municipal bonds underwritten by JPMorgan, which totaled $38.5 billion in long-term par amount in 2013. The firm gained more market share last year than any other top underwriter, claiming the second-biggest slice of the market with 12.4% of all bonds.
"If interest rates rise over the coming year, there will be a resurgence in demand for both municipal and corporate debt," Peter Crawford, senior vice president at Charles Schwab, said in an interview. "Last year was a big year for the corporate side with the low interest environment."
With access to over 800 new J.P. Morgan corporate issues in 2013, there was a 70% upsurge in retail demand by Schwab clients, doubling the face value of orders, the company said. The investor interest in the bonds exceeded expectations, Crawford said.
Many of the municipal market's biggest dealers are bolstering their retail efforts as banks look to get bonds in the hands of individual investors. In June 2013, Morgan Stanley completed the acquisition of more than 16,000 financial advisors previously shared in a joint venture with Citi. In December, Citi and UBS Financial Services entered a distribution deal to share a 17,000-broker network.
"Our fixed income issuer clients have benefited from exposure to one of the largest retail brokerage platforms in the country," Paul Palmeri, head of public finance at JPMorgan, said in the press release. "We are pleased to be able to continue bringing Schwab clients access to our fixed income primary and secondary offerings."
Schwab's BondSource service for retail investors enables individual municipal bond buyers to search and access over 36,000 primary and secondary bonds from more than 200 dealers and includes a weekly calendar that alerts subscribers of new issues.
"Our clients are becoming more aware of the offerings and experiencing the benefits." Crawford said. "Clients are getting more comfortable with buying so demand is increasing."
Schwab clients have invested in more than $1.9 billion across 1,200 municipal bond deals issued by J.P. Morgan since the agreement was first put into place in 2010, the company said in the press release.
Schwab's relationship with JPMorgan is supplemented with a similar agreement with Piper Jaffray, which often issues smaller, more locally-based deals than JPM, the firm said.
