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Bond Buyer Index

Bond Buyer Index
InvestingBondsMunicipal Bonds

What Is Bond Buyer Index?

The Bond Buyer Index, otherwise called the Bond Buyer's Municipal Bond Index or BB40, is a muni bond index distributed by The Bond Buyer, a daily finance paper that covers the municipal bond market and tracks 40 highly-rated, long-term municipal bonds.

The index is the benchmark for municipal bond index futures traded on the CBOT.

Understanding Bond Buyer Index

Investors utilize the Bond Buyer Index to plot interest rate designs in the municipal market. Traders utilize the daily Bond Buyer Index to trade municipal bond index futures and futures options on the Chicago Board of Trade (CBOT). The Bond Buyer Index was subsequently made by the CBOT to be the basis for the Municipal Bond Index futures and options contract. Furthermore, investment advisers utilize the Bond Buyer's Municipal Bond Index to assess and follow changes in new issues of high rated municipal bonds.

The Bond Buyer Index, otherwise called the BB40 index, depends on the prices of 40 as of late issued and actively traded long-term municipal bonds. The 40 municipal bonds remembered for the index involves general obligation (GO) bonds and revenue issues rated An or better with:

  • a term portion of something like $50 million ($75 million for housing issues)
  • something like 19 years staying to development
  • a first call date somewhere in the range of seven and 16 years
  • somewhere around one call at par before redemption.

While bonds that are noncallable and bonds that are subject to the alternative least tax (AMT) and fixed-rate re-marketings are eligible for inclusion in the index, taxable bonds, variable-rate bonds, and private situations are excluded.

Ascertaining the Bond Buyer Index

The Bond Buyer Index is calculated and distributed by The Bond Buyer, which communicates the value of the index in points and 32ds (thirty seconds). The price citations given by six municipal bond dealers are utilized to compute the index's value two times every day — at 12 p.m. also, 3 p.m. The index is spread daily and the parts of the index are adjusted two times a month.

The futures contracts are quoted in points and 32ds of principal value, and the options contracts are quoted in points and 64ths. The unit value of each contract is $100,000 and a one-32d change in price addresses $31.25.

Other Bond Buyer Indices

The Bond Buyer Index gives an indication of the average week by week yields of the Bond Buyer 20 (BB20) Index, the Bond Buyer 11 (BB11) Index, the Revenue Bond Index, the SIFMA index, and the Municipal Market Data (MMD) Curve.

These indices are widely watched by investors and traders in the municipal bond market. The Bond Buyer 20 index, for example, tracks the yields of 20 general obligation municipal bonds.

Highlights

  • The Bond Buyer Index, otherwise called the BB40 index, depends on the prices of 40 as of late issued and actively traded long-term municipal bonds.
  • Investors utilize the Bond Buyer Index to plot interest rate designs in the municipal market while traders use it to trade municipal bond index futures and options on the CBOT
  • Other municipal bond indices exist including the BB20 and BB11.
  • The Bond Buyer Index is a daily index of municipal bond prices made by the Chicago Board of Trade and distributed by The Bond Buyer.