Assured Guaranty Municipal Corp. hopes to double its secondary market public finance business with the launch of a Web platform rolled out on Thursday.
Working with TheMuniCenter (TMC) — a Web-based muni platform that executed nearly one-fifth of all inter-dealer transactions last year — investors can now purchase insurance on individual trades with the click of a mouse.
“It gives us a good second approach to the marketplace,” Dominic Frederico, Assured’s chief executive, said at the National Municipal Bond Summit in Miami on Thursday. “The bond insurance market is not dead by any stretch of the imagination.”
About 5,000 pre-approved municipal credits were listed on TMC’s Web site Thursday, out of 37,000 offered daily. TMC users can look at real-time quotes of all kinds of bonds, select ones that are available for a secondary market guaranty, and then compare the yield of buying the bond naked or wrapped.
For instance, a 25-year bond issued by New York’s Metropolitan Transportation Authority was available for purchase with a 5.13% yield Thursday afternoon. The buyer could sacrifice 25 basis points of yield in exchange for having the bonds guaranteed by Assured.
“Our goal is to make our secondary market insurance highly accessible, and we believe this will be a particularly efficient tool for execution of smaller size trades,” said William O’Keefe, a founding member of TheMuniCenter who is now Assured Guaranty’s senior managing director for municipal marketing.
The minimum trade amount for the secondary market insurance is $100,000, which O’Keefe called the minimum point for pricing efficiency for buyers and insurers. The average size of trades on the platform is between $3.5 million and $4 million.
“Historically, the process has been calling up an insurer, getting a certificate delivered to your trustee, delivering the bonds, etc.,” said Tom Vales, chief executive at TMC. “That whole manual process has now been automated and you can insure your bonds in seconds.”
TheMuniCenter first tried rolling out point-and-click bond wraps in June 2002, but there was little appetite for it in the heydays of bond insurance. Now that new insurance is scarce and credit concerns are becoming paramount, the hope is that more buyers are seeking the comfort of having a guarantee.
For Assured, the platform continues a theme initiated earlier this year when it launched a website aimed at retail investors, www.ThinkAssuredGuaranty.com.
“When insurance was more in vogue, it was reliant upon the dealers to solicit interest,” Vales said. “And now this is the first time where the insurer is actually going directly into the marketplace and advertising itself.”
O’Keefe said secondary insurance accounts for about 15% of Assured Guaranty Municipal’s public finance business. With the TMC deal, he wouldn’t be surprised if that percentage were to double to 30%.
“It’s hard to tell when you first go live, but TheMuniCenter has a lot of product, a lot of visibility, and a lot of professional eyes on it,” O’Keefe said. “We have significant capacity there so good things can happen. It’s just the beginning.”