I was looking online for some Muni's material, but only found a couple dated threads. Interning at BAML/MS/GS and was interested in this space. Any thoughts on Munis trading? Would be good to hear from someone in the business with Munis, whether that's in Sales, Trading, or Capital Markets. Is there similar headcount cutting as in other business lines? What do you think is in store in the next 3-5 years in the space, is electronic trading or unlikely due to the lack of liquidity in the market? I have heard pay is at a haircut to other desks, but if this is true, to what extent?
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Muni trading is a much slower pace than other desks on the floor, but in my opinion it's beginning to make a comeback as more investors are focusing on ways to mitigate their taxes. It is still very slow, with a trade taking sometimes 15/20 minutes. A unique aspect that other sectors don't seem to have as much of anymore is the close interpersonal relationships because of the nature of the sector being so far behind other fixed income sectors. You can still get paid very well. There will most likely be little change in the mechanics of the muni sector in the next 3-5 years... Eventually it will catch up and become efficient, but its not quite there. This lack of liquidity, however, also allows a lot more negotiations in each transaction.
Hope this helped
Wow can't tell you enough how helpful that reply was, I really appreciate the detail you went into.
That slower nature you described is exactly why it appeals to me, as I like how it's still relatively fast paced since it's under the S&T umbrella, but more analytical than Cash Equities or IG Credit.
My thought process was to start on the capital markets side (if I'm able to), build a technical skillset and then lateral to trading. That way, if the inevitable disruption does occur in munis, I'll have a skillset to fall back on. Would you go about it this way or would you just go straight to trading (assuming both opportunities are there)?
Can't PM you, but would love to continue the conversation if you could PM me.
Totally agree with everything above. Munis are run by old men wearing over-sized suits, like I'm talking guys who barely know how to use BBG chat and remember in detail about how the city of BFE handled a situation where they #4 taxpayer left the city in 1987. I think there are several interesting aspects of the muni market unique to other sectors.
There is a huge supply demand imbalance right now that I think should continue for sometime. The change in tax law has eliminated advance refunding which has reduced supply, while also capping the SALT dedication which has increased demand especially from retail investors. Somebody is going to have to come up with a way to create more supply out of thin air.
The bid ask is huge especially when controlling for rating. The average rating of the muni market is around AA-, what other sector do AA bonds with an 8yr duration to the call trade with a 1/2 point bid ask. Think better than IG quality with HY type spreads in some spots. Obviously less liquidity in some names and worse convexity but still the bid/ask is still wide relative to other products. This also means that there can be very real $$ in small size trades. You can make a nice living trading funkier credits in 200-500K sizes.
There are so many dealers who underwrite certain credits and focus on trading certain issuers that your career is very portable. At a BB you are going to be the guy who large asset managers ask to provide good sized tight markets on liquid credits and you are going to underwrite very large generally very boring deals. At a regional you have a totally different set of credits you underwrite and trade and can bring a totally different value prop to the buyside.
There is a ton of retail in the market and a lot accounts that play in niche spaces in the muni market which have very interesting credit stories/structures.
There is no shorting of individual CUSIPs in munis and no liquid CDS market. So markets are often customer markets or street markets.
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