What You Need to Know About the Muni Bond Index

The muni bond index is a type of investment that's often overlooked, but it's a great option for those looking for tax-free income. It's a broad measure of the municipal bond market, tracking the performance of a wide range of municipal bonds.

Muni bonds are issued by local governments and other public entities to finance various projects and activities, such as building roads and schools. The muni bond index is designed to provide a diversified portfolio of these bonds, spreading risk across different issuers and sectors.

Investors who are looking for tax-free income may find muni bonds particularly appealing, especially in high-tax states. The muni bond index has historically provided a stable source of returns, with lower volatility compared to other types of bonds.

The AP Municipal Bond Index is a benchmark that measures the performance of municipal bonds across the country. It's a collaboration between the Associated Press and Municipal Bond Information Services, LLC, and is based on observable, intraday pretrade and trade data.

The index will reflect trading in over 5,200 tax-exempt municipal bonds, making it a comprehensive measure of the $3.7 trillion municipal bond universe. This is similar to how the Standard & Poor’s 500 index measures the performance of large U.S. stocks.

To be included in the AP Municipal Bond Index, an issue must meet certain criteria, such as having an outstanding amount of $10 million or more, and being a weekly reset, effective on Wednesday. The criteria are designed to ensure that the index accurately represents activity in the variable rate demand note market.

Here are the specific criteria for the AP Municipal Bond Index:

The index is calculated on a weekly basis, with the value being the average of the reset rates after all screened and dropped rates are excluded.

The Associated Press is about to unveil a new branded index to measure municipal bond performance. This index is a collaboration with Municipal Bond Information Services, LLC.

The AP Municipal Bond Index will reflect trading in over 5,200 tax-exempt municipal bonds across the country. The $3.7 trillion municipal bond universe will be measured by this index.

The AP Muni Bond Index will be used on a wider scale starting September 5th. This is a significant milestone for the index.

The index is based on observable, intraday pretrade and trade data, making it a unique benchmark. This is a departure from the past, where the AP put its name on a financial markets index in 1935.

The AP Municipal Bond Index has the potential to bring in significant revenue over the next few years. This is a key aspect of the business side of the initiative.

The index will be sold to investment firms, primarily through AP's sales team and partner MBIS. This partnership will help to drive the success of the index.

The SIFMA Municipal Swap Index is a 7-day high-grade market index that tracks tax-exempt Variable Rate Demand Obligations (VRDOs) with specific characteristics.

It's calculated and published by Bloomberg, and overseen by SIFMA's Municipal Swap Index Committee.

To qualify for inclusion in the index, an issue must meet certain criteria, which include being a weekly reset, not subject to Alternative Minimum Tax, having an outstanding amount of $10 million or more, and having the highest short-term rating.

Here are the specific criteria:

The index is calculated on a weekly basis, and released to the public on Wednesday, considering the standard deviation of the rates, screened for compliance with the criteria, and excluding all issues falling outside +/-1.0 standard deviation.

The Index is calculated on a weekly basis and released to the public on Wednesday. It's a crucial part of the muni bond market, and understanding how it's calculated can give you valuable insights.

The Index calculation involves several steps, including screening for compliance with certain criteria, dropping issues that fall outside of a certain standard deviation, and limiting the number of participating remarketing agents. This ensures that the Index accurately represents the market.

Here are the specific steps involved in the Index calculation:

The Index calculation is a crucial process that helps determine the value of the Index. It's calculated on a weekly basis and released to the public on Wednesday.

The calculation starts by screening the rates for compliance with the criteria, which means any issues that don't meet the requirements are dropped. This is done to ensure the accuracy and reliability of the Index.

The standard deviation of the rates is also calculated, and any issues falling outside of +/-1.0 standard deviation are dropped. This helps to eliminate outliers and ensure that the Index is representative of the market.

To prevent any one remarketing agent from dominating the Index, each participating agent is limited to no greater than 15 percent of the number of securities in the Index. This is done through a random exclusion method.

The final step in the calculation is to determine the Index value, which is the average of the reset rates after all screened and dropped rates are excluded.

The source of rate information used to calculate the Index is crucial to understand. As of August 20, 2014, the rate must have been reported to the MSRB’s SHORT system by no later than 3:15 p.m. Eastern Time on the Wednesday that the Index is calculated.

Reset rates reported to the SHORT system are used as the basis for the Index calculation. Bloomberg, the Calculation Agent for the Index, relies on this data.

Before August 20, 2014, VRDO reset rates were derived from Municipal Market Data’s (MMD’s) Variable Rate Demand Note Network. This network allows over 80 remarketing agents to transmit daily rate change information for their issues to MMD’s database.

The MSRB’s SHORT system is the primary source of rate information for Index calculations as of August 20, 2014. This system provides timely and accurate data for the Index calculation.

The Municipal Swap Index has been around since 1992, when SIFMA first initiated it.

SIFMA has a long-term commitment to providing the Index, intending to do so as long as data are available.

The Index has been calculated consistently on a weekly basis since its inception in 1992, giving users a reliable and ongoing benchmark.

SIFMA's dedication to providing the Index for an extended period is a testament to its value and relevance in the market.

The muni bond index is made up of actual issues from a source of data on VRDOs that is subject to regulatory oversight and enforcement, representing the entire universe of VRDO securities.

The index is calculated by applying certain criteria to ensure it's truly representative. The Calculation Agent is responsible for this process.

The index holdings are dominated by issuers from the state and local government sectors, with California, New York City Transitional Finance Authority, and Dormitory Authority of State of New York being the top three issuers, holding 4.54%, 3.94%, and 3.72% of the index, respectively.

Here is a breakdown of the top issuers:

The Index represents the market because it's comprised of actual issues from a source of data on VRDOs that's subject to regulatory oversight and enforcement, representing the entire universe of VRDO securities.

The Calculation Agent applies specific criteria to ensure the Index is truly representative.

The Bond Buyer Municipal Bond Index is a good example of an Index that's designed to represent the market. It's based on 40 long-term bond prices.

The Index is regularly updated to reflect changes in the market, with weekly average yields to maturity being a key metric. For instance, the Bond Buyer Municipal Bond Index's weekly average yield to maturity slipped to 3.71% from 3.74% in one week.

The Index's yields can fluctuate based on market conditions, as seen in the Bond Buyer Municipal Bond Index's yield decreasing to 3.71% from 3.74% in one week.

Here's a brief look at how the Bond Buyer Municipal Bond Index's yields changed in recent weeks:

In this section, we'll take a closer look at the holdings of the index, which provide valuable insights into the types of issuers and their corresponding weights.

The top issuer is California (State of), with a weight of 4.54%.

The holdings are dominated by issuers from the United States, with a total weight of 95.41%.

The Associated Press is launching a new index to measure municipal bond performance, the AP Muni Bond Index, which will track over 5,200 tax-exempt municipal bonds across the country.

This index is a collaboration with Municipal Bond Information Services, LLC, a national consortium of municipal inter-dealer brokers, and will be used on a wider scale starting September 5.

The AP Muni Bond Index will be the only benchmark based on observable, intraday pretrade and trade data, making it a unique and reliable measure of municipal bond performance.

The index will be used to reflect trading in the $3.7 trillion municipal bond universe, just like the Standard & Poor’s 500 index measures the performance of large U.S. stocks.

AP's partner, Municipal Bond Information Services, LLC, is a network of bond dealers that will provide the data for the index.

The AP Muni Bond Index will be sold to investment firms by AP's sales team, along with the underlying data.

Business News will also beef up its coverage of municipal bonds and the government projects behind them, fitting with AP's mission.

The Associated Press has a history of creating financial markets indexes, having introduced the Associated Press Average in 1935, which measured 60 stocks listed on the New York Stock Exchange, but was discontinued in the mid-1990s.

The AP Muni Bond Index is not the only municipal bond index out there, the Securities Industry and Financial Markets Association (SIFMA) Municipal Swap Index is another example, which is a 7-day high-grade market index comprised of tax-exempt Variable Rate Demand Obligations (VRDOs) with certain characteristics.

The SIFMA Municipal Swap Index is calculated on a weekly basis, and released to the public on Wednesday, using a specific methodology that considers the standard deviation of the rates, screened for compliance with the criteria, and the number of participating remarketing agents.

The Bond Buyer indexes, such as the Bond Buyer Municipal Bond Index, also provide a measure of municipal bond performance, with the weekly average yield to maturity of the index decreasing to 3.71% from 3.74%.

If you're interested in investing in municipal bonds, the iShares National Muni Bond ETF (MUB) is a popular option, offering access to over 2,000 municipal bonds in a single fund, at a low cost.

Here are some key facts about the SIFMA Municipal Swap Index:

The muni bond index has its ups and downs, and one way to measure its performance is by looking at its premium and discount. The premium and discount refer to how well the index is beating or lagging behind its benchmark.

The premium and discount can be significant, with the index often returning between 0.21% and 9.43% over a 3-year period, depending on the time frame. This means that the index has outperformed its benchmark in some periods.

One notable example is the 1-year period, where the index returned 9.23%, while the benchmark returned 9.43%, resulting in a negative premium of -0.20%. This suggests that the index underperformed its benchmark over that time frame.

Here's a breakdown of the premium and discount over different time periods:

As you can see, the premium and discount can vary significantly over different time periods. It's essential to keep an eye on these numbers to get a sense of the index's performance relative to its benchmark.