What Is Bond Buyer Index?
The Bond Buyer Index, also known as the Bond Buyer's Municipal Bond Index or BB40, is a muni bond index published by The Bond Buyer, a daily finance newspaper 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.
- The Bond Buyer Index is a daily index of municipal bond prices created by the Chicago Board of Trade and published by The Bond Buyer.
- The Bond Buyer Index, also known as the BB40 index, is based on the prices of 40 recently issued and actively traded long-term municipal bonds.
- Investors use the Bond Buyer Index to plot interest rate patterns 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.
Understanding Bond Buyer Index
Investors use the Bond Buyer Index to plot interest rate patterns in the municipal market. Traders use 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 thus created by the CBOT to be the basis for the Municipal Bond Index futures and options contract. In addition, investment advisers use the Bond Buyer's Municipal Bond Index to evaluate and track changes in new issues of high rated municipal bonds.
The Bond Buyer Index, also known as the BB40 index, is based on the prices of 40 recently issued and actively traded long-term municipal bonds. The 40 municipal bonds included in the index comprises of general obligation (GO) bonds and revenue issues rated A or better with:
- a term portion of at least $50 million ($75 million for housing issues)
- at least 19 years remaining to maturity
- a first call date between seven and 16 years
- at least one call at par before redemption.
While bonds that are noncallable and bonds that are subject to the alternative minimum tax (AMT) and fixed-rate re-marketings are eligible for inclusion in the index, taxable bonds, variable-rate bonds, and private placements are excluded.
Calculating the Bond Buyer Index
The Bond Buyer Index is calculated and published by The Bond Buyer, which expresses the value of the index in points and 32ds (thirty seconds). The price quotations provided by six municipal bond dealers are used to calculate the index's value twice a day—at 12 p.m. and 3 p.m. The index is disseminated daily and the components of the index are adjusted twice per 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 represents $31.25.
Other Bond Buyer Indices
The Bond Buyer Index provides an indication of the average weekly 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.
All of these indices are widely watched by investors and traders in the municipal bond market. The Bond Buyer 20 index, for instance, tracks the yields of 20 general obligation municipal bonds.