Triple Red Flags Announced by MunicipalBonds.com,
Worst Municipal Bond Market Spreads for 3rd Quarter 2002,
Daily Free E-mail of State-by-State Price Listings

MunicipalBonds.com today releases its study revealing the Worst Spreads for the 3rd Quarter 2002. This time, the worst offender is 70 points and hails from the State of Illinois.

The study is limited by industry restrictions to "actively traded" Municipal Bonds. Industry leadership defines "actively traded" bonds as those bonds that traded at least three times in one trading day. In addition, the Municipal Bond industry still refuses to attach dealer identifiers to the trade data. What this means is that none of us can know who the offenders are behind these wide and potentially illegal spreads. MunicipalBonds.com continues its demands that 1) all Municipal Bond trades be reported next day, 2) mistakes in price reporting, if any, be publicly released in a dedicated mistake report, and 3) dealer identifiers be attached to all trades.

Previously, Municipal Bonds released studies of the Worst Spreads of Q2/2002, Worst Spreads of Q1/2002, Worst Spreads of 2001 and the Worst Spreads of 2000. The Congressionally-mandated Municipal Securities Rulemaking Board (MSRB) was forced to collect trade information beginning in 1994. If we were allowed access to this information, it is our opinion that we would uncover equally outrageous spreads in each of the years between 1994 and 1999.

With this continued proof of unfair and inefficient markets within the Municipal Bond industry, MunicipalBonds.com will continue to advocate and work to actualize "fair pricing" in the Municipal Bond markets. Our Red Flag reports and Worst Spread studies make it apparent that something must be done.

Triple Red Flag Standard
In a recent newspaper article, Kit Taylor, executive director of the MSRB stated that "too much is made of price spreads...that of the average 29,000 Municipal Bond trades in a day, (MunicipalBonds.com) finds only (a few) as questionable." This is not fair or acceptable. Our Red Flag Report and Worst Spread studies to date have considered best scenario two-sided markets. We calculate spreads based on best/highest bid compared to best/lowest offer. Clearly, this methodology actually favored the Muni industry because spreads could be worse. Additionally, it should be clear to all of you that we consider only the much smaller statistic of two-sided markets for a Red Flag. Those bonds that traded only on the bid side or only on the offer side were not represented.

As of October 1, 2002, MunicipalBonds.com will convert its entire site to show lowest/highest bid and lowest/highest offer. There will now be three Red Flags possible after each actively traded Municipal Bond.

• The first Red Flag will identify a bid side that has a greater than 1 point spread between lowest and highest bid.
• The second Red Flag will continue to identify greater than 4 point spreads between bid and offer, but will now consider worst/lowest bid with worst/highest offer.
• The third Red Flag will identify an offer side that has a greater than 1 point spread between lowest and highest offer.

It is to be expected that there will be a great deal more red showing within our daily price reports. But this is really the fair and reasonable methodology in which to view our markets.

Free Daily E-mails of State Markets
MunicipalBonds.com now offers separate and unique Municipal Bond pricing databases for all 50 States, plus 2 U.S. Territories. A free daily State-specific e-mail report can be delivered to you every morning. Please see MunicipalBonds.com for easy sign up, or contact us at the number, emails below.

Worst Municipal Bond Market Spreads for the 3rd Quarter of 2002
State-by-State Pricing Reports

Contact: Kevin Olson
Company: MunicipalBonds.com
Phone: 415-922-7870
Email: Kevin@MunicipalBonds.com
URL: http://www.municipalbonds.com