Thursday, 25 February 2021 17:41

A Big Change is Coming for the Muni Market

Written by
Rate this item
(6 votes)

(New York)

The muni market is in a very interesting place. Despite the overall erosion of credit quality for municipalities since the pandemic began, demand for munis is at an all-time high and returns have been great. Yields are very low, but until very recently, they still offered a substantial benefit over Treasuries. All of this has coincided with a major change to the space: the infusion of institutional investors. For decades, the muni space has been dominated by HNW individuals and their advisors, but over the last couple years, institutional buying has been rising strongly. According to a study by an industry body “Over the last decade, customer purchases of fixed-rate, tax-exempt municipal securities of $100,000 or less decreased by 46%, the MSRB found. Meanwhile, institutional-sized purchases of over $1 million increased 46% in the same time period”. “Most of the large retail managers have moved clients from traditional, transactional, retail accounts into discretionary platforms like SMAs … The firm itself then makes the allocation decisions and is, therefore, less responsible for making sure that the client understands their investment decision”, said Matt Fabian, partner at Municipal Market Analytics.


FINSUM: This is actually good news for all involved—retail investors and advisors included (in a broad sense)—as it improves liquidity and tightens spreads.

Contact Us

Newsletter

Subscribe

Subscribe to our daily newsletter

Top
We use cookies to improve our website. By continuing to use this website, you are giving consent to cookies being used. More details…