Muni tools of the trade make us better practitioners

Maksym Yemelyanov - stock.adobe.

In addition to The Bond Buyer, the Municipal Securities Rulemaking Board (MSRB), rating agencies, Bloomberg, Investortools, Municipal Market Analytics (MMA), LSEG, and other well-regarded organizations offer effective tools to manage risk exposure, establish market trends and identify opportunities. 

These tools are not just for the buyside and sellside communities, but can be of critical importance for issuers, bond lawyers, and municipal advisors as they prepare for and structure their deals. 

Although a number of these services are subscription-based, there are many web-based sources of publicly available information that support transparency, analysis and strategic guidance. 

The municipal bond market is heavily reliant upon both qualitative and quantitative information. This is particularly important given the list of long-standing market inefficiencies that frame the day-to-day operations of a $4.3 trillion industry with 50,000 issuers. 

Municipal securities represent a non-quoted, over-the-counter market, with fragmented supply across a network of national and regional broker-dealers. Shifting economics and credit quality — as well as complex bond structures improved, yet still inconsistent data availability/disclosure, and rating anomalies — allow for opportunistic security selection. 

As a long-standing consumer of macro data and all things relevant to municipal security credit and market analysis, I appreciate the myriad of information that is available. This is particularly important given the above-noted market inefficiencies and uneven nature of municipal bond disclosure. 

In addition to a wide-ranging assortment of federal, state, and local governmental websites, an expanding complement of subscription-based vendor services offering customized data solutions adds to the muni toolbox. The sources referenced in this article are by no means exhaustive, but they are illustrative of the tools employed by market practitioners given their varied roles. 

The 1975 creation of the MSRB and the adoption of SEC Rule 15c2-12 in 1989 ushered in newly designated Nationally Recognized Municipal Securities Information Repositories (NRMSIR) designed to create a new level of disclosure, surveillance, and transparency. 

Although the SEC designated NRMSIR status to multiple firms the MSRB's own Electronic Municipal Market Access (EMMA) system emerged in 2009 as the exclusively designated centralized repository stemming from the many inefficiencies and frustrations of a multi-party platform.

The MSRB is a multi-faceted, "self-regulatory" organization for the municipal securities market. I frequently toggle between the MSRB and EMMA websites, depending on what type of information I require. 

The breadth and depth of the MSRB's suite of products and services provide a concierge experience to market stakeholders, policymakers, regulators and academics. Official statements, material event notifications, financial and operating reports, trade history, and a stand-alone fact book are all available. 

Over the past decade, issuer websites have improved significantly in terms of content, disclosures and navigational ease. This is the result of constructive dialogue between issuers and their advisors, and activist investor pressure. 

In many instances, rating agency reports can be found on issuer websites. States often post an outline of corporate governance, economic data highlights, audit and budget statements and pension plan information to their sites. 

The National Conference of State Legislators, the National Association of State Budget Officers, and the National Association of State Treasurers are state-centric, nonpartisan industry associations that maintain a standard of best practices, promote national advocacy, and provide relevant information for market participants. 

Their websites offer disclosure on state operational and fiscal activity, providing research, policy analysis and customized training. I find these resources particularly useful as a way to establish broad themes, identify common budgetary pressures and the timeliness and effectiveness of remedial measures, and to track federal policy implications on state and local finances.

Other sector-specific websites promote similar industry standards and national advocacy, while keeping stakeholders abreast of sector developments and federal policy in areas such as housing, healthcare, higher education, K-12, charter schools, cities and airports. 

Much of the data and research found on these sites proves to be invaluable when making informed investment decisions and can provide deeper layers of disclosure beyond what may be available in public offering documents. The Urban Institute and the National League of Cities are good examples of city-centric resources.

For example, state housing finance agencies and authorities maintain their own dedicated websites, and the National Council of State Housing Agencies can complement these resources through its own website. Detailed information on mortgage loan activity, low-income tax credits, affordable housing initiatives, and rental assistance programs can offer strategic guidance to a cross-section of stakeholders. Other useful sites for housing include the Joint Center for Housing Studies at Harvard and the Mortgage Bankers Association.

As the higher education sector confronts greater pressure, the Integrated Postsecondary Education System (IPEDS) data center can be accessed through the National Center for Education Statistics. This portal provides updated data pertaining to enrollment, tuition, financial operations, staffing and student retention. The National Association of College and University Business Officers (NACUBO) website is another useful tool within the higher education space.

The availability of macro-centric data helps to shape context as we assess the strategic implications of national economic reports. The federal government maintains various comprehensive websites that offer key statistical data surrounding labor, growth, and wealth. The most widely used sites include the U.S. Census Bureau, Bureau of Labor Statistics, and the Bureau of Economic Analysis. Private, non-profit organizations such as the Brookings Institution, the National Bureau of Economic Research, and The Pew Charitable Trusts are excellent research-driven providers of public policy initiatives.

One of my favorite "go-to" sites is the Federal Reserve Bank. In addition to providing accompanying statements to the eight FOMC policy meetings, a replay of the Chair's press conference and scheduled releases of the Fed's Summary of Economic Projections, the website contains proprietary economic research, consumer-related surveys, a listing of seminars and workshops, updated supervisory and regulatory initiatives, quarterly financial accounts of the United States, and a host of other data.

Federal policy shifts are having a material impact upon the municipal bond market, with particular implications for the healthcare, higher education, K-12, and state and local general obligation sectors. It is important to stay informed about legislative developments that affect the public finance ecosystem as they can influence deal structure, volume, credit quality, market pricing, and investor appetite. Congress maintains an official, dedicated website that shows current legislative activity and includes a research library of reports.

Web-based resources and subscriber-based credit and market platforms are not meant to be considered in isolation, but rather they should be incorporated into the due diligence and analytical process as a comprehensive review. Oftentimes, these tools enable me to make refined credit and sector distinctions and help to establish more efficient surveillance protocols.