Abstract
A study of institutional- and retail-sized municipal bond transactions finds bid-ask spreads for retail-sized trades average well over 2% of price for both rated and non-rated issues, much higher than spreads for the institutional trades. Retail trade marketability measures suggest that municipal bonds have an implicit constraint of more than one month of non-marketability (time to transact at a given price), compared to under ten days for institutional-sized trades. The market is fairly well structured in terms of trading costs by bond rating. Lower-grade issues are costlier to transact in, with non-rated issues falling somewhere between Baa and high-yield. The major structural determinants of the bid-ask spread are volatility (time to maturity), trade volume, coupon, callability, and pre-refunded status.
- © 2004 Pageant Media Ltd
|
Don’t have access? IPR Journals is the leading provider of applicable theoretical research for all those in the investment management community. Benefit from access to our content including:
|
Log in using your username and password
In this issue
Jump to section
Cited By...
- No citing articles found.