Muni Bond Inventory

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Aug 14, 2008 9:08 pm

I was talking to a buddy of mine still at the green machine and he was moaning about the fact that there was zero muni bonds for our state in HIS inventory. I looked at the inventory at my firm and there were 124 issues and over 110 million in inventory. I could feel him getting sick on the phone..... Thank goodness for independence......

Aug 14, 2008 10:26 pm

nog, who are you with?

Aug 14, 2008 10:47 pm

Can anyone from UBS comment on how their muni bond business has been affected by the firm getting out of the muni underwriting business?

Aug 15, 2008 12:44 am

Why not have your friend call the Jones bond desk and request a spreadsheet of available investment grade muni's?

Aug 15, 2008 10:24 am

The difference could be what Jones is willing to put on the inventory system.  Your inventory might have 124 issues, but none of them might fit what the Jones bond buyers are looking for.  I don't sell a lot of muni bonds, but it is frustrating to pull up our state inventory and find there aren't any issues available.  It's happened a couple of times in the last 6 months.   

 
 
Aug 15, 2008 11:09 am

I don't have an inventory.  I can go to several bond trading venues and pick from what is out there from thousands of issues nation wide as well as some of the new issues.  (Not all new issues since the indy broker I'm with doesn't underwrite)

 
Rank is right though there is more out there than what is in the Jones inventory.  They WANT you to sell the inventory because Jones makes more money, but you can ask for other issues available by State, maturity etc.  Then have your bond desk place the trade for you.
Aug 15, 2008 11:19 am

[

  They WANT you to sell the inventory because Jones makes more money, but you can ask for other issues available by State, maturity etc. 
 
I thought the only profit center at Jones is the FA.
Aug 15, 2008 12:28 pm

Jones sells their bonds acting as principal where they sell from their own inventory where most other firms act as agent and sell bonds and get paid a commission similar to stock trades. (10,15,20,25 per bond) Thanks Series 24.

Aug 15, 2008 2:08 pm
Ron 14:

[

  They WANT you to sell the inventory because Jones makes more money, but you can ask for other issues available by State, maturity etc. 
 
I thought the only profit center at Jones is the FA.
 
They are.  The bond desk does not trade for their own profit. 
Aug 15, 2008 3:14 pm
babbling looney:

I don't have an inventory.  I can go to several bond trading venues and pick from what is out there from thousands of issues nation wide as well as some of the new issues.  (Not all new issues since the indy broker I'm with doesn't underwrite)

 
Rank is right though there is more out there than what is in the Jones inventory.  They WANT you to sell the inventory because Jones makes more money, but you can ask for other issues available by State, maturity etc.  Then have your bond desk place the trade for you.
 
Who are you getting lists from? I am looking for a muni source.
Aug 15, 2008 5:47 pm

the diff is that all those shorter term munis in our inv would not work at jones cuz you cannot fit a commission in it.  jones needs a good 10, 20, 30 years to fit in the "net". therefore: smaller inv!!!!!! thank god for indy

Aug 15, 2008 6:37 pm

Not true.  We actually see quite a few short term munis.  They don't always have a lot of net in them, just like with CDs and fixed annuities under 5 years.  We've got close to a million in MBDs under 5 years in maturity on our system right now.   All of them netting more than 1 point.  All of them are A+ or better too. 

Aug 15, 2008 8:22 pm

b24 - have you ever sold a bond in a client account at jones. I have a friend who works there and has on more than one occasion, they gave him 96, put it back in  the inventory at 101. Hate to tell you, but jones bonds are marked up more then at another other brokerage, even with the commission put in. Call around and see

Aug 16, 2008 12:05 am

JB,

I have only occassionally sold bonds, but I don't back test to see what they put them back into inventory at. I typically buy bonds to hold them, so we are just looking for a good coupon, the right mix of maturities, and the right credit ratings. I am selling a lot of 5 and 10 year bonds right now. I like to explain to my clients the ins and outs of bonds, what they need to do for better rates, how price fluctuation works, etc. And frankly, I don't care what the other brokerages are selling them at. I don't work there.



FYI NEWNEW - I sell a lot of 5 year muni's and corps, especially right now. Sure they only pay me 1% or less, but the client is getting usually 1% or so more than a CD (on the corp), and a very good rate on the muni. Open your eyes. Don't just go by what all the newbies talk about ("hey, did you see that 30 year 6.5% GE Bond!"). Most of us fit the client's needs, not whatever will pay the most. You have likely never sorted the bond screen for anything other than interest rate.

Aug 16, 2008 12:19 am

JamesBond, you are a moron.

 
I've placed 10's of millions of corps, muni's, goverment agency, TIPS, etc. out of Jone's inventory.  I have checked www.investinginbonds.com time and time again to see the markup on these same bonds, especially those issues I sell and see back in inventory.  Only once or twice have the bonds been marked up by more than the internal rip, and those were days the bond market moved dramatically and the bonds were marked to market.  So before you go around spreading rumors about some "friend" you know, I suggest getting your facts strait.
Aug 16, 2008 1:25 am
Spaceman Spiff:

The difference could be what Jones is willing to put on the inventory system.  Your inventory might have 124 issues, but none of them might fit what the Jones bond buyers are looking for.  I don't sell a lot of muni bonds, but it is frustrating to pull up our state inventory and find there aren't any issues available.  It's happened a couple of times in the last 6 months.   

 
 
Bzzzz wrong answer.....  All of the issues were AA or above. My inventory is  the street's inventory and your inventory is Jone's inventory. Even clients understand that if you have a trader that buy's bonds for a B/D's inventory and then a FA that sells to a client that there is markup on both sides. Open your eyes and you will see.......
Aug 16, 2008 11:24 am
pussman:
babbling looney:

I don't have an inventory.  I can go to several bond trading venues and pick from what is out there from thousands of issues nation wide as well as some of the new issues.  (Not all new issues since the indy broker I'm with doesn't underwrite)

 
Rank is right though there is more out there than what is in the Jones inventory.  They WANT you to sell the inventory because Jones makes more money, but you can ask for other issues available by State, maturity etc.  Then have your bond desk place the trade for you.
 
Who are you getting lists from? I am looking for a muni source.
 
Well, the way it works for me is I sign into one of the bond data bases, like Pershing.  Then I enter whatever criteria that I want for the bond.  Corp, muni, structured, preferred par bond etc.    Maturity between 5 and 15 yrs.  Rating  AA or better or all ratings if I want to get a junky bond   The search comes back with all available bonds including those in other linked companies inventories.   Like Noggin says: the street inventory.  New bonds and bonds that other investors have sold or want to sell. 
 
Occaisonally there will be a new issue that I can participate in and sell to the client at par.   Not so much for munis but corporates come down the pike fairly regularly.  I just did quite a bit on a GE Capital 5yr maturity, 5.65% coupon that was a new issue.  Yeah, my pay out is small 1% but the clients are good with a short term fling with GE Capital at this rate.
Aug 16, 2008 1:19 pm

rankstocks,

Grow up. You dont know me or my business but i know your kind. I have nothing against you or your firm, but facts are facts, on the same bond you buy at 102 with three in it others can buy at 101 or better with the same commision.  Last time i heard the word "rip" was that cheesy movie with the ben affleck and vin diesel.  Your firm cant buy or hold inventory like the wirehouse firms and therefore cant compete on price nor can the 5 person bond desk ( i have seen it and it is a joke) take the time to get bids on bonds so they look at what the market says and buys it in at that price.

Aug 16, 2008 5:12 pm
noggin:
Spaceman Spiff:

The difference could be what Jones is willing to put on the inventory system.  Your inventory might have 124 issues, but none of them might fit what the Jones bond buyers are looking for.  I don't sell a lot of muni bonds, but it is frustrating to pull up our state inventory and find there aren't any issues available.  It's happened a couple of times in the last 6 months.   

 
 
Bzzzz wrong answer.....  All of the issues were AA or above. My inventory is  the street's inventory and your inventory is Jone's inventory. Even clients understand that if you have a trader that buy's bonds for a B/D's inventory and then a FA that sells to a client that there is markup on both sides. Open your eyes and you will see.......
I wondered when you were going to clarify that.  Technically, LPL (my B/D) is just like Babb's...we have NO inventory, but have a lot of access to various inventories out there.  That being said, I've rarely had any problem in being very competitive on yield and finding plenty of in-state choices.  Holding inventory is a mixed bag depending on which direction the bond market is moving, and I'm frankly happy to have that out of the pricing equation at my B/D.
 
As an aside, there's not much I like better in the bond world right now over munis.  It doesn't look like any tax increase has been baked into the prices yet.  If we get a tax increase in the next 12-18 months, look for munis to get a LOT more expensive.
Aug 17, 2008 6:09 pm

The comment about investinginbonds.com was a good one. It does provide transparency, however you do not necessarily know if it was a buy/sell or client or inventory buy.


Also, for about 1-3 year maturities, right now brokered CD rates will beat most TEY muni yields. However, muni yields are pretty attractive now. Alot of that has to do with the issuers. If your bond has insurance on it, make sure to know what the underlying rating it, because that is why it is trading at a lower price.