Bond Buyer 11
The Bond Buyer 11 (BB11) is a widely followed municipal bond index published by The Bond Buyer, a leading trade publication covering the U.S. municipal bond market. It tracks the average yield of 11 high-grade, long-term municipal bonds with maturities of 20 years or more, serving as a benchmark for institutional and retail investors to gauge the health and direction of the tax-exempt bond market. Unlike broad market indices, the BB11 focuses specifically on investment-grade munis, making it a barometer for credit quality and interest rate sensitivity in the sector.
SHORT DEFINITION
The Bond Buyer 11 (BB11) is a widely followed municipal bond index published by The Bond Buyer, a leading trade publication covering the U.S. municipal bond market. It tracks the average yield of 11 high-grade, long-term municipal bonds with maturities of 20 years or more, serving as a benchmark for institutional and retail investors to gauge the health and direction of the tax-exempt bond market. Unlike broad market indices, the BB11 focuses specifically on investment-grade munis, making it a barometer for credit quality and interest rate sensitivity in the sector.
WHAT IT IS
The Bond Buyer 11 is not a tradable index like the S&P 500 but rather a yield-based benchmark constructed from a curated basket of 11 municipal bonds. These bonds are selected based on their credit quality (typically rated AA or higher by major agencies like Moody’s or S&P), liquidity, and representativeness of the broader high-grade muni market. The index is updated daily and reflects the average yield-to-maturity of these 11 bonds, offering a snapshot of long-term borrowing costs for state and local governments.
Historically, the BB11 has been used by portfolio managers, underwriters, and policymakers to assess relative value in the muni market. For example, if the BB11 yield rises sharply over a short period, it may signal rising interest rates or increased credit concerns among top-tier issuers. Conversely, a declining yield often indicates strong demand for safe-haven assets or expectations of Federal Reserve rate cuts. Because municipal bonds are exempt from federal income tax—and often state and local taxes too—the BB11 yield is frequently compared to taxable equivalents (like Treasury yields) to determine the “tax-equivalent yield,” which helps investors evaluate true after-tax returns.
HOW IT WORKS
The mechanics of the Bond Buyer 11 are straightforward but deliberate. Each business day, The Bond Buyer’s editorial and data team selects 11 bonds that meet strict criteria: they must be general obligation or revenue bonds issued by U.S. municipalities, have at least 20 years remaining to maturity, carry an investment-grade rating (AA or above), and exhibit sufficient trading volume to ensure price reliability. The yields of these 11 bonds are then averaged arithmetically to produce the BB11 yield.
This average is not weighted by issue size or market capitalization—each bond carries equal weight regardless of how large or small the underlying debt offering is. This equal-weighting approach ensures that smaller but high-quality issuers aren’t overshadowed by mega-bonds from large states like California or New York. The index is recalculated and published every weekday, typically by mid-morning Eastern Time, and is widely disseminated through financial data platforms such as Bloomberg, Refinitiv, and The Bond Buyer’s own website.
PRACTICAL EXAMPLE
Suppose on January 15, 2024, the Bond Buyer 11 reports an average yield of 3.85%. An investor considering a new 20-year municipal bond offering a 4.10% coupon might view this as attractive—since it’s 25 basis points above the BB11 average—suggesting either higher risk or a potential bargain if the issuer’s credit profile is strong. Conversely, if the same investor holds a bond yielding only 3.60%, they may consider selling before rates rise further, especially if the BB11 has been trending upward over the past month.
In another scenario, a city treasurer planning a $500 million infrastructure bond issuance in Q2 2024 would monitor the BB11 closely. If the index jumps from 3.70% to 4.20% in six weeks due to Fed tightening, the city might accelerate its offering to lock in lower borrowing costs—or delay it if they believe yields will stabilize. This real-time benchmarking helps issuers time the market effectively, saving taxpayers millions in interest expenses over the life of the bond.
WHY IT MATTERS
For individual investors, the BB11 provides a transparent, daily reference point to evaluate whether a municipal bond is fairly priced relative to peers. It also informs decisions about asset allocation—especially for retirees seeking stable, tax-advantaged income. Institutional investors, including mutual funds and insurance companies, use the BB11 to benchmark portfolio performance and manage duration risk.
Beyond investing, the BB11 influences public finance policy. When the index spikes, it can signal fiscal stress in the municipal sector, prompting state legislatures to reconsider spending or borrowing plans. During the 2020 pandemic, for instance, the BB11 surged past 4.5% amid market turmoil, reflecting fears of revenue shortfalls—even for highly rated issuers—before stabilizing as federal aid flowed in.
LIMITATIONS AND RISKS
One key limitation of the BB11 is its narrow scope: only 11 bonds represent a market with over $4 trillion in outstanding debt. This small sample may not capture regional disparities or sector-specific risks (e.g., water utilities vs. school districts). Additionally, because it excludes lower-rated munis, it doesn’t reflect credit stress in high-yield or distressed segments.
Another risk is misinterpretation. Investors sometimes assume a low BB11 yield means all munis are cheap, but individual bonds can trade at wide spreads due to call provisions, liquidity, or issuer-specific news. Relying solely on the BB11 without analyzing call schedules, tax implications, or alternative minimum tax (AMT) status can lead to poor investment choices.
FAQ
Q: Is the Bond Buyer 11 the same as the Municipal Bond Index (MBI)?
A: No. The MBI (often referring to the S&P Municipal Bond Index or ICE BofA indices) includes hundreds or thousands of bonds across credit ratings and maturities. The BB11 is a focused, yield-only benchmark of just 11 high-grade, long-term bonds.
Q: Can I invest directly in the Bond Buyer 11?
A: No—it’s a yield index, not a fund. However, some ETFs and mutual funds aim to track similar high-grade muni strategies, such as the iShares National Muni Bond ETF (MUB) or Vanguard Tax-Exempt Bond Index Fund (VTEAX).
Q: How often is the BB11 updated?
A: It’s calculated and published every business day by The Bond Buyer, typically by 11:00 AM ET, using closing yields from the prior trading session.
BOTTOM LINE
The Bond Buyer 11 remains a trusted, concise gauge of long-term, high-quality municipal bond yields. While not a tradable asset, it empowers investors and issuers alike to make informed decisions in a complex, tax-sensitive market. Always pair BB11 data with deeper analysis of individual bond features—and consult a financial advisor—to align muni investments with your risk tolerance and tax situation.
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Educational disclaimer: This MoneyBestPal article is for general financial education only. It is not investment, tax, legal, or accounting advice. Consider speaking with a qualified professional before making decisions based on your personal situation.
