Fed report puts municipal market at $2.9 trillion in first quarter

By Angela McDaniels

Tacoma, Wash., June 9 - The total amount of municipal securities and loans outstanding decreased to $2.90 trillion at the end of the first quarter from $2.93 trillion at the end of 2010, according to the Z.1 flow and outstandings report released by the Federal Reserve on Thursday.

But the latest figure was up from $2.84 trillion at the end of the same quarter of 2010.

Of the $2.90 trillion outstanding at quarter-end, the majority - $2.43 trillion - was issued by state and local governments, followed by $268.2 billion issued by non-profit organizations and $206.5 billion issued by non-financial corporate business.

On the buyside, the household sector held $1.08 trillion of the securities outstanding at the end of the first quarter, followed by mutual funds with $516.5 billion, property-casualty insurance companies with $349.7 billion, money market mutual funds with $320.7 billion and commercial banks with $251.8 billion.

On a year-over-year basis, the amount of securities held increased for commercial banks (up 14.8%), the household sector (up 3.5%) and mutual funds (up 3.0%). The amount fell 13.3% for money market mutual funds and 3.9% for property-casualty insurance companies.

Flows fall by $62.7 billion

On a seasonally adjusted annualized and net basis, total liabilities in the municipals market declined by $62.7 billion during the first quarter of 2011, according to the report.

In the first quarter of 2010, net liabilities increased by $116.4 billion.

The $62.7 billion decline was driven by a $72.0 billion decline for state and local governments, offset by a $6.5 billion increase for non-profit organizations and a $2.9 billion increase for non-financial corporate businesses.

In comparison, liabilities increased by $734.6 billion for Treasuries, increased by $224.5 billion for agencies and decreased by $2.1 billion for corporate and foreign bonds in the first quarter on a seasonally adjusted annual basis.

On the buyside, municipals held by money market mutual funds plunged by $56.5 billion on a seasonally adjusted annual basis. Mutual funds notched a decline of $40.1 billion, and brokers and dealers reduced their holdings by $12.0 billion.

Commercial banking and non-financial corporate businesses posted net increases of $18.5 billion and $11.0 billion, respectively.

The household sector recorded a modest increase of $3.6 billion in the first quarter after increasing its holdings by $153.3 billion during the fourth quarter of 2010.

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