Markit now gives pricing for municipal bonds, mining many sources

By Susanna Moon

Chicago, Nov. 4 - Markit said it now provides pricing for municipal bonds, drawing on a range of observable market data to price 900,000 municipal bonds rated Aaa/AAA to Baa3/BBB-.

Markit produces independent prices for municipal bonds by aggregating market data from multiple sources, according to a press release.

Bid-offer levels from quotes, transaction information from the Municipal Securities Rule Making Board and other market data feed directly into Markit's calibration engine and enable rapid updates of municipal bond prices, the release noted.

"The muni market, like the corporate market, has experienced a dislocation between credit ratings and credit spreads. It is unrealistic to assume that a general obligation bond with similar ratings issued by different states should be priced in the same way," Kevin Gould, president of Markit North America, said in the release.

Markit's evaluated pricing methodology for municipal bonds incorporates the financial condition of each state and municipality, uses of proceeds - 62 in all - and other factors at the issue level to drive movements in price, regardless of the credit rating.

As a result, Markit moves prices for specific Cusips for specific reasons, in contrast to the common practice of moving prices for multiple bonds in a credit rating basket at the same time, according to the release.

Markit also offers clients metrics on the level of price-point support and liquidity for each Cusip and deal within which the Cusip resides. Specialist support teams also can help with price challenges and other inquiries.

"What Markit is doing is bringing a corporate credit mentality to the muni market, and we have introduced a more granular calibration methodology to keep pace with the dynamic valuation patterns in this market," Gould said.

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