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Investing in the High Yield Municipal Market: How to Profit from the Current Municipal Credit Crisis and Earn Attractive Tax-Exempt Interest Income by Triet Nguyen

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Advances in Trading and Price Discovery Technology

The MSRB recently embarked on a more aggressive effort to improve transparency and disclosure in the municipal market. It is quite conceivable that over the next few years, individual investors and their financial advisors will have access to much-improved financial disclosure, price transparency, and risk management tools. Whether this will translate into better credit decisions remains to be seen, but the necessary analytical tools will certainly be available for savvy individual investors to dip their toes into the high yield market.

Looking further ahead, the ongoing advances in technology will surely support better price discovery tools as well as more sophisticated trading programs in the municipal market. The unprecedented computing power now available to analyze and parse real-time transaction data from EMMA and other data sources has the potential to revolutionize bond pricing models, which in turn should lead to significant advances in algorithmic trading. It wouldn’t be much of a stretch to see some of those tools applied to municipal credit trading as well.

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