Municipal bonds underwritten by The Goldman Sachs Group Inc. will be available through the 600 broker-dealer partners of Incapital LLC as a result of a deal that the two firms announced last week.
The partnership marks the first time that Goldman, which doesn't operate its own retail network, will make its muni bonds available widely to retail brokers.
“This is great news for advisers because they are getting access to issues they have never had access to. The question will be, at what price?” said Alan Dalewitz, a senior vice president at Herbert J. Sims & Co. Inc.
“This is not a secondary market product with variable pricing,” said Michael Du Vally, a Goldman spokesman. “We are selling investors product at the original offering yields on bond new issues, which are the exact same yields all investors would receive if they buy the new issue.”
Other muni underwriters, including Bank of America Merrill Lynch, JPMorgan Chase & Co. and Morgan Stanley Smith Barney LLC have their own broad retail- distribution networks or arrangements with retail firms.
In April, JPMorgan signed an agreement with The Charles Schwab Corp. to distribute its muni bonds. The bank has a similar deal with UBS AG.
After the market crash of 2008, retail investors flocked to the relative safety and tax-free returns of muni bonds. But retail access to new muni issues has been harder to come by because a few key underwriters, notably Lehman Brothers Holdings Inc. and The Bear Stearns Cos. Inc., are no longer in business, said Miriam Sjoblom, an analyst at Morningstar Inc.
Thirty-six percent of muni bonds are owned by U.S. households, according to an Aug. 3 report issued by the Treasury Department.
Initially, 175 of Incapital's broker-dealers, representing 85,000 brokers, will have access to the Goldman muni bonds, said John Radtke, president of Incapital.
E-mail Jessica Toonkel at jtoonkel@investmentnews.com.
