Munis' 'Frenetic' Trading Pace Smashes Record

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00:00Tell us a little bit more. I mean, I feel like this is something she said, or is this a serious

00:04proposal? So this is a proposal that she had brought up during budget hearing yesterday. And

00:10Chicago is in the midst of its budget season. And at the start of her talk related to her

00:16particular department, she talked about how she wanted to cease the direct purchases of treasuries.

00:22Just, you know, in terms of the facts, the city of Chicago, the portfolio doesn't actually include

00:27any direct purchases of treasuries currently. The last time they owned about 8 million or so

00:32was last year in 2024. But further, she also wants to get city council approval to make some

00:39adjustments, some shifts in terms of money market funds and other types of assets that might include

00:45treasuries. She does need to get approval from the city council, as far as we know. And it's unclear

00:50whether aldermen are supportive of it. Some, you know, one of them called it reckless. Another one

00:55questioned the sort of justification for excluding treasuries from the portfolio when treasuries

01:01have outperformed the portfolio's returns last year. Yeah, it always comes down to the actual

01:07returns. Speaking of actual returns, let's talk a little bit about munis and the volume of activity

01:13we've seen of late. Apparently, we're looking at a record pace of trading. And I guess this is in

01:19contrast to what we've seen earlier this year, where munis kind of were lagging behind a bit.

01:24Well, muni trading is already at a record this year, and we still have more than a month

01:29to go in terms of trading. We had April when munis was, you know, as the organization that

01:38tracks this data called frenetic trading in April. And then we've been following up with month after

01:44month of really large trading volumes. Partly that's because supply has been so huge. We've

01:50seen a record amount of state and local debt sales. And then following up on that afterwards when they

01:55enter the market and investors and dealers are trading them, you know, exchanging hands, that has

02:01led to this record volume for the rest of the year. What about demand? Because demand at the start of the

02:06year was not so great. There are some concerns that the one big beautiful bill would remove some of the

02:10tax advantages of these securities. But that proved not to be the case. Did demand make up for all of that

02:18later on? So we've seen inflows into the market this year of about $41 billion. And one of the things

02:25to note is that a significant amount of those inflows have been towards ETFs that focus on munis. And so

02:31the traders and investors that I've spoken with have said that all of that together, the record supply,

02:38the inflows into the markets, including ETFs as well as separately managed account, has soaked up

02:44all of that trading and all of that volume. All right. So what how does that where does that leave

02:49us for 2026? Do they expect this volume to continue? So the traders I've spoken with have said

02:55that supply being at a record this year and then expectations that supply is going to set another

03:01record next year will contribute to a fairly active year next year as well.