Fed report puts municipal market at $3.74 trillion at end of 2011

By Angela McDaniels

Tacoma, Wash., March 8 - The total amount of municipal securities and loans outstanding at the end of 2011 was $3.74 trillion, according to the Z.1 flow and outstandings report released by the Federal Reserve on Thursday.

The amount outstanding remained basically flat during 2011, ranging from a low of $3.73 trillion in the third quarter to a high of $3.78 trillion in the first quarter.

Of the $3.74 trillion outstanding at year's end, the majority - $2.99 trillion - was issued by state and local governments, followed by $497.4 billion issued by nonfinancial corporate businesses and $254.4 billion issued by nonprofit organizations.

On the buyside, the household sector held the greatest amount of securities at the end of the year, $1.88 trillion. It was followed by mutual funds with $542.8 billion, property-casualty insurance companies with $347.1 billion, money market mutual funds with $296.5 billion and U.S.-chartered commercial banks with $285.9 billion.

On a year-over-year basis, the amount of securities held increased for U.S.-chartered commercial banks (up 17.4%) and mutual funds (up 3.1%), was close to flat for property-casualty insurance companies (down 0.37%) and fell for money market mutual funds (down 11.3%) and the household sector (down 4%).

Flows fall by $52.2 billion

Total liabilities in the municipals market fell by a net $52.2 billion during 2011, according to the report. On a seasonally adjusted annualized and net basis, total liabilities declined by $14.7 billion during the fourth quarter.

In comparison, net issues were $1.07 trillion for Treasuries, negative $37.1 billion for agencies and $24.5 billion for corporate and foreign bonds in 2011.

In 2010, municipal liabilities increased by a net $97.7 billion. They increased by $192.4 billion, on an adjusted annualized and net basis, in the fourth quarter of 2010.

The $52.2 billion decline in 2011 was driven by a $59.5 billion decline for state and local governments and a $7.8 billion decline for nonprofit organizations, offset by a $15.1 billion increase for nonfinancial corporate businesses.

For fourth quarter, the net decline was $30.3 billion for state and local governments and $6.7 billion for nonprofit organization, and nonfinancial corporate business registered a $22.3 billion net increase, all on a seasonally adjusted annual basis.

Household holdings decrease

On the buyside, municipals held by the household sector fell by a net $78.5 billion in 2011, the most of any sector. Holdings decreased by $37.9 billion for money market mutual funds and $8.5 billion for brokers and dealers.

U.S.-chartered commercial banks saw the biggest net increase in holdings in 2011, $42.4 billion. They were followed by mutual funds with a $16.2 billion net increase and the rest of the world with a $10.9 billion net increase.

For the fourth quarter, the largest net decreases were logged by the household sector, money market mutual funds and brokers and dealers. They decreased their holdings by $111.8 billion, $29.9 billion and $20.6 billion, respectively, on a seasonally adjusted annual basis.

U.S. chartered commercial banks increased their holdings the most in the fourth quarter (up $67.4 billion), followed by mutual funds (up $63.6 billion) and the rest of the world (up $12.0 billion).

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