PT  - JOURNAL ARTICLE
AU  - Gwangheon Hong
AU  - Arthur D Warga
TI  - Municipal Marketability
AID  - 10.3905/jfi.2004.439839
DP  - 2004 Sep 30
TA  - The Journal of Fixed Income
PG  - 86--95
VI  - 14
IP  - 2
4099  - https://pm-research.com/content/14/2/86.short
4100  - https://pm-research.com/content/14/2/86.full
AB  - 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.