MSRB fact book shows highest number of trades since 2013

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WASHINGTON — The number of municipal bond trades increased by 2.9% in 2018 to a five-year high, while the par dollar amount remained stable, according to the Municipal Securities Rulemaking Board.

The MSRB's annual fact book, released Tuesday, showed about $3 trillion in securities traded and almost 10.2 million trades total. The total number of trades was the highest since it was 10.6 million in 2013. It was about 9.9 million in 2017.

Fixed-rate securities and variable-rate securities trades both increased, said Marcelo Vieira, MSRB director of research, with variable-rate trades the highest since the financial crisis in 2008. He said the increase in variable-rate trades could be due to more variable-rate demand obligation types of securities coming to market.

“The fact that it’s (trading) the highest it’s been in five years to me was surprising because the primary market wasn’t very strong last year and that tends to be one of the main drivers,” Vieira said. “I was surprised for sure.”

Also from the fact book, the number of continuing disclosures decreased by about 9.8% and was lower than expected, Vieira said.

“I would say that most years we see an uptick in the kind of filings with the MSRB, but this year the number of continuing disclosures decreased. More specifically it was the lowest since 2012,” Vieira said.

Vieira attributed the decrease to a decline in event-based disclosures like bond calls, defeasances and rating changes in a space where there are usually 15 to 20 types of disclosure.

Financial disclosures, such as comprehensive annual financial reports decreased, but not nearly as much as event type disclosures, Vieira said.

In total, event disclosures decreased 16.7% to 50,722 in 2018 from 60,883 in 2017. Financial disclosures decreased 5.6% to approximately 97,000 and is the lowest since 2013, according to a press release.

Vieira attributed the decrease in defeasance disclosure to the 2017 Tax Cut and Jobs Act, which eliminated tax-exempt advance refundings. The law made for an interesting year for munis, with many issuers coming to market in December 2017 to get ahead of the changes.

"So the volume in December 2017 was one of the highest, if not the highest monthly volume in terms of new issuance and I think a lot of people expected the first couple months of 2018 to be slow because people came to market in December," he said.

In 2018, there was an increase in unique securities outstanding from 14,000 in 2017 to 15,500 in 2018. Usually it varies from 11,000 to 14,000 from year to year, Vieira said.

“Those numbers tend to be quite stable,” he said. “I’m not quite sure the reason, but we certainly saw that increase.”

The number of MSRB registered dealers decreased, but Vieira said it’s been a steady decline because of mergers and acquisitions of smaller firms.

In 2017, the MSRB had 1,346 registered dealers and at the same time last year, there were 1,277 dealers, a 5.1% decrease.

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