Over the past decade the municipal market has commonly relied on the benchmark “AAA” provided by MMD. Until the Consensus was created there was no way to measure the bias and variability of the MMD curve. Since 1999, the basis point spread between the Consensus and MMD has become more variable and volatile. Those investors and traders, who conduct business with those institutions that price bonds using MMD, can now take advantage of the curve’s bias by comparing the two curves.

The Consensus is made available at no cost to investors and dealers through a wide variety of public and 3rd party data providers in order to facilitate greater transparency and integrity of market pricing, and derivative settlement.

Figure 1 – Provides an example to the increasing variability of the MMD benchmark yields when compared to the consistent Consensus. The area graph of Figure 1 illustrates the basis point spread between the two curve’s 10-year spot maturity (MMD’s offering bias creates a natural tendency for the Thomson data to appear as a lower yield than the Consensus). What is evident is that the spread since 2002 has become more volatile and that exceptionally wide spreads (MMD has had a tendency to “accelerate” in firm markets associated with large competitively bid high-grade issues) have been unsustainable.

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