The Bond Buyer Index: Definition, Calculation, and Market Insights

The Bond Buyer Index, commonly referred to as BB40, plays a pivotal role in the municipal bond market. It provides investors with valuable insights into interest rate patterns within the municipal market. Traders rely on the daily fluctuations of the Bond Buyer Index to engage in trading municipal bond index futures and futures options on the Chicago Board of Trade (CBOT). The creation of the Bond Buyer Index by CBOT was specifically to serve as the foundation for the Municipal Bond Index futures and options contract. Moreover, investment advisers leverage The Bond Buyer’s Municipal Bond Index to evaluate and monitor changes in newly issued high-rated municipal bonds.

The BB40 index is based on the prices of 40 recently issued and actively traded long-term municipal bonds. These bonds, which are carefully selected, consist of general obligation (GO) bonds and revenue issues rated A or better. The criteria for inclusion are stringent, requiring a term portion of at least $50 million (or $75 million for housing issues), at least 19 years remaining to maturity, a first call date between seven and 16 years, and at least one call at par before redemption. While certain types of bonds are eligible for inclusion, such as noncallable bonds and those subject to the alternative minimum tax (AMT), others like taxable bonds, variable-rate bonds, and private placements are excluded.

The calculation and publication of the Bond Buyer Index are managed by The Bond Buyer. This index is expressed in points and 32nds (thirty seconds) and is determined using price quotations from six municipal bond dealers. The index’s value is computed twice a day, at 12 p.m. and 3 p.m., and is disseminated daily, with adjustments to its components made twice per month. Futures contracts linked to this index are quoted in points and 32nds of principal value, while options contracts are quoted in points and 64ths. Each contract has a unit value of $100,000, with a one-32nd change in price representing $31.25.

In addition to the BB40 index, The Bond Buyer also provides other indices that serve as indicators of various aspects of the municipal bond market. These include the Bond Buyer 20 (BB20) Index, Bond Buyer 11 (BB11) Index, Revenue Bond Index, SIFMA index, and the Municipal Market Data (MMD) Curve. For instance, the BB20 index tracks the average weekly yields of 20 general obligation municipal bonds. All of these indices are closely monitored by investors and traders alike, offering valuable insights into the dynamics of the municipal bond market.

The Bond Buyer Index, also known as the BB40, is a daily index of municipal bond prices published by The Bond Buyer.

The Bond Buyer Index is calculated using price quotations from six municipal bond dealers and is expressed in points and 32nds.

Other Bond Buyer indices include the BB20, BB11, Revenue Bond Index, SIFMA index, and the Municipal Market Data (MMD) Curve.