Bond Buyer Indexes and Market Indicators

Now that you can analyze, price, and calculate yields on municipal bonds, let's look at the market-level indicators that track the overall muni market. The Bond Buyer publishes several indexes and supply/demand metrics that appear frequently on the exam.

What Are the Bond Buyer Indexes?

Key relationships:

• The 11-Bond Index is a subset of the 20-Bond Index, consisting of the highest-quality bonds
• Because the 11-Bond Index contains higher-quality bonds, its yield is lower than the 20-Bond Index (lower risk = lower yield)
• The 20-Bond, 11-Bond, and Revenue Bond indexes are expressed as yields (the Revenue Bond Index yields more, since revenue bonds are lower-rated than GOs)
• The 40-Bond (Municipal Bond Index) is the only one expressed as a dollar price, and it is published daily (it underlies the muni bond futures contract)
• The three yield indexes (20-Bond, 11-Bond, and Revenue Bond) are published weekly by The Bond Buyer

Exam Tip: Gotchas

• The 40-Bond Index is quoted as a PRICE; the 11-Bond and 20-Bond are quoted as YIELDS. The exam may test which index is price-based vs. yield-based.
• The 11-Bond Index has LOWER yields than the 20-Bond. Higher quality = lower yield. The 11-Bond is a subset of the highest-quality bonds from the 20-Bond Index.

What Is the 30-Day Visible Supply?

The 30-day visible supply tracks the total dollar volume of new municipal bond issues (with maturities of 13 months or more) expected to reach the market in the next 30 days.

• Published daily by The Bond Buyer
• A rising visible supply → more bonds coming to market → potential downward pressure on prices (upward on yields)
• A falling visible supply → fewer new issues → potential upward pressure on prices (downward on yields)

Think of it this way: More supply with the same demand pushes prices down.

Exam Tip: Gotchas

• Visible supply is published DAILY (not weekly like the indexes and placement ratio).
• Rising visible supply is BEARISH for bond prices. More bonds hitting the market = downward price pressure.

What Does the Placement Ratio Measure?

The placement ratio measures how successfully new muni issues are being absorbed by investors.

Formula: Placement ratio = dollar amount of new bonds sold / dollar amount of new bonds offered

• Published weekly by The Bond Buyer

Think of it this way: The placement ratio shows how hungry investors are for new muni bonds. Above 90% means buyers are snapping them up; below 70% means deals are going unsold.

How Do These Indicators Work Together?

• Visible supply: High = bearish (more supply, lower prices); Low = bullish (less supply, higher prices)
• Placement ratio: High = bullish (strong demand); Low = bearish (weak demand)

The two indicators often move together as a market signal:

• A high visible supply combined with a low placement ratio signals a tough market for new issuers
• A low visible supply combined with a high placement ratio signals strong market conditions

Exam Tip: Gotchas

• High visible supply + low placement ratio = bearish. Lots of new bonds and few buyers is the worst combination for issuers.
• Visible supply and placement ratio move in opposite directions in terms of market sentiment. High visible supply is bearish, but a high placement ratio is bullish.

What Should You Check on Exam Day?

• Name all four Bond Buyer indexes and sort them by basis: three yield indexes (11-Bond, 20-Bond, Revenue Bond) versus the one price index (40-Bond).
• Match each index to its publication frequency: the three yield indexes publish weekly, the 40-Bond publishes daily.
• Confirm 30-day visible supply publishes daily and the placement ratio publishes weekly; do not swap the two frequencies.
• Read visible-supply and placement-ratio scenarios together: rising supply with a falling placement ratio is the most bearish combination.