njhowie
Thinks s/he gets paid by the post
- Joined
- Mar 11, 2012
- Messages
- 3,931
Actually, individual investors play a big part in the municipal bond market. This report from the Municipal Securities Rulemaking Board combines individual investors and nonprofits as a single category, but as of 2018 the two groups held more muni debt than mutual funds, banks, ETFs and brokers combined. http://www.msrb.org/msrb1/pdfs/MSRB-Brief-Trends-Bond-Ownership.pdf
So, the little guys have a chance in the muni market, perhaps, because they are the muni market.
That is interesting as far as ownership, however, it is certainly not what is taking place in the muni market day to day as far as trading. Anyone who reviews the trading and what is taking place can see that. Individuals may own a significant portion of municipal bonds outstanding, however, they are not purchasing them on their own and it is not the "small guy".
With most all brokers, the minimum municipal bond purchase permitted is 5 bonds, $5000. How many "small guy" individuals/households do you suppose are doing $5000 (minimum) worth of municipal bonds per purchase/sale on their own behalf? It's not the small guy at a discount broker getting commission free equity trades. It's also not the retiree you see participating on E-R.org having some portion of their AA in fixed income (most loathe even holding individual bonds, of any type). It's a tiny sliver of all individual investors.
One unique characteristic of the muni market is a comparatively small average trade size, in the order of $100,000-$200,000.
https://www.marketsmedia.com/muni-bond-trading-evolves
Do you think the small guy is in there making that "comparatively small" average $100,000-$200,000 muni purchase/sale? Of course not.
Lastly, as far as ownership, this report below, from SIFMA, which is a little more recent than the one you've provided from MSRB, indicates that individual/household ownership of municipal bonds is now below 50% of the total. See page 14 for US Municipal Holders at 45.7% of the total as of 2019 Q4. This may be indicative of a shift, as interest rates cratered through 2019. However, again, ownership does not reflect how buying/selling in the muni market takes place day to day.
https://www.sifma.org/wp-content/up...Quarterly-Fixed-Income-2020-03-27-SIFMA-1.pdf
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