MUB Premium To NAV Highest Since Early 2009

Tyler Durden's picture

Now that the $25 million AUM Egypt ETF is expected to be indicative of the entire Egyptian stock market, and which will likely be claimed to be correct even if its underlying securities never manage to trade up to parity, when and if it reopens, there is little that can surprise us anymore. With that in mind, we would like to present the MUB ETF, whose recent surge has left it trading at a premium to NAV that has not been seen since just before the March 2009 666 lows. As the chart below shows, the last time the MUB was trading at 100.79, it did so at a record discount to NAV. Now - about three months later, it is the inverse, as the municipal tracker has now inverted and is trading at a multi-year premium. This begs the question: does underlying value chase the synthetic price? And if so, does it mean that it is time for a compression trade in which the MCDX is sold coupled with selling of the MUB in anticipation of a return to parity spread. That would be the case in a normal world. In this one, in which the WTI-Brent spread just hit another fresh all time wide, who knows...

Short term MUB to NAV chart...

And longer term:

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Godisanhftbot's picture

Why use Fridays spike close when its now trading at 99.75, well off that 2% prem.

whatz that smell's picture

..."Why use Fridays spike close when its now trading at 99.75, well off that 2% prem."...

why? just to piss you off, of course.

ZeroPower's picture

Interesting thesis:

This begs the question: does underlying value chase the synthetic price? 

One would probably have to look at whether MUB is structured as a pure synthetic ETF (linking swaps with counterpartys) or is it 'physical' backed by the actual muni's themselves. Either way, the premium or discount to NAV is fairly common (in low volume names), and thus why daily rebalancing is key for any of these vehicles.

Cdad's picture

This begs the question: does underlying value chase the synthetic price?

The answer is contained within the question:  synthetic.  A synthemarket.

Yet another crystal clear example that the nominal buyers of anything left in this market are entirely brainless and have an attention span of a kindergarten student.  The expression "dumb money" has been redefined and those once thought of as smart money.

None of this can be maintained.  Not equities, not debt, and probably not even PMs.  The US dollar, while likely to go out fighting, will go out nonetheless.

I think I have come to understand that our absolute worst fears regarding this once great nation are about to be revealed.  And I could try to predict for you what form the near term revelation might take...but why bother?  The truth is that underlying all is the kleptocracy which, using software and high speed and conveniently located computers, has now arbitraged to death anything even once remotely thought of as value.

All that remains is for the great convergence.  Market credibility has zero.


BKGuy's picture

I wonder if the US based WTI contract (which is subject to manipulation by major players on behalf of the Govt.) is reflecting this, whereas the Brent contract is less so. We've seen the conspiracy theories in Silver, why would WTI be off limits, especially when it is the "price" quoted to Americans and when the surge in the same would run counter to the standard Govt./Fed. lines of argument? 

10kby2k's picture


Trading at 99.76 right now--half that premium gone today.  The Meredith Whitney effect has ended...many muni ETFs were at a serious discount, but that has evaporated. 

Why the fuck is the market so ORDERLY?  It trades in such a narrow range each day. If there is news it gaps up (or down) and stays so VIX-less. Manipulators wouldn't script a market this orderly.  Or is the extreme orderly-ness to brainwash the masses (come on--people can't be that stupid---or can they?)

And the spread between WTI and brent continues to persist (i thought there was a way to arb that, but glad i didn't find it---woulda been on the wrong side). Access to oil tankers is restricted to a very elite group. Load up in Texas ....deliver in europe? I just don't get it at all?

If the average joe's house has no equity.....the government better engineer his 401k to have some wealth. Is it that simple?

I'm dumfounded.

Nathan Hale's picture

Unfortunately, I think the answer to your question is algorithmic trading.  Any information that materially affects prices in any market connected to these 'robots' is instantly disseminated, directly or indirectly, to any and all that have even a tenuous correlation.  These prices probably reflect, as much as is mathematically possible, the true value of any particular asset for that discreet moment. Obviously, this is far from ideal as, apparent to most that follow this website, they are prone, through design or otherwise, to vicious feedback loops.  Right now, I would guess we are in an upside mobius.  When the switch is flipped, oops, I mean when the market turns, watch the fuck out below.