Do Risk Premia Explain Dealer Markups in Municipal Bond Offerings?

Bergstresser, Daniel; Herb, Patrick

doi:10.2139/ssrn.3881297

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Placement Of Offerings With Investors1

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2023

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Cited by 2 publications

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“…The large underwriters targeted by the new Texas laws are much more likely to have national distribution networks and may be better at placing municipal bonds with a wider array of investors than the non-targeted regional or small underwriters. Similar to Bergstresser and Luby (2018) and Bergstresser and Herb (2021),…”

Section: Placement Of Offerings With Investorsmentioning

confidence: 89%

Gas, Guns, and Governments: Financial Costs of Anti-ESG Policies

Garrett¹,

Ivanov²

2023

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We study how regulation limiting ESG policies distorts financial market outcomes. In 2021 Texas enacted laws that prohibit municipalities from contracting with banks with certain ESG policies, leading to the exit of five of the largest municipal bond underwriters from the state. Issuers previously reliant on these underwriters face higher uncertainty and borrowing costs since the enactment of the laws. These effects are consistent with a deterioration in underwriter competition as issuers face fewer potential underwriters.

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Section: Placement Of Offerings With Investorsmentioning

confidence: 89%

Gas, Guns, and Governments: Financial Costs of Anti-ESG Policies

Garrett¹,

Ivanov²

2023

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“…Recent studies of municipal bond underwriting includeBergstresser and Herb (2022) andGarrett (2021).…”

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confidence: 99%

Do Municipal Bond Dealers Give Their Customers “Fair and Reasonable” Pricing?

Griffin¹,

HIRSCHEY²,

Kruger

2023

The Journal of Finance

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Municipal bonds exhibit considerable retail pricing variation, even for same‐size trades of the same bond on the same day, and even from the same dealer. Markups vary widely across dealers. Trading strongly clusters on eighth price increments, and clustered trades exhibit higher markups. Yields are often lowered to just above salient numbers. Machine learning estimates exploiting the richness of the data show that dealers that use strategic pricing have systematically higher markups. Recent Municipal Securities Rulemaking Board rules have had only a limited impact on markups. While a subset of dealers focus on best execution, many dealers appear focused on opportunistic pricing.

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Do Risk Premia Explain Dealer Markups in Municipal Bond Offerings?

Cited by 2 publications

References 37 publications

Gas, Guns, and Governments: Financial Costs of Anti-ESG Policies

Gas, Guns, and Governments: Financial Costs of Anti-ESG Policies

Do Municipal Bond Dealers Give Their Customers “Fair and Reasonable” Pricing?

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