Municipal XBRL could shake up bond market

Posted on December 9, 2022 by Editor

With the Financial Data Transparency Act (FDTA), currently pending before the US Senate, Barnet Sherman in Forbes this week argued that introducing digital, machine-readable financial reporting for municipality level financial data is key to transforming the municipal bond market.

By introducing XBRL for reporting of municipal financial data, the FTDA would provide investors, regulators and the general public with far more accessible, transparent, usable data. The result would be for data on cities, towns, and local authorities cash flows, assets, debts and more to be widely available for simple and quick analysis.

Sherman argues that this data is crucial to accurate pricing of municipal bonds – which, currently, are opaquely valued using significant guess work: “With hard, evidence-based data, risk spread values could be established by the market and pricing services alike with more transparency and objectivity. Along with this improved data comes improved liquidity. The lubricant of an efficient market is information.

At XBRL International we fully support the FDTA and wider moves towards applying digital, structured data to municipal finances in the US (and elsewhere!). XBRL US has already developed and piloted an initial taxonomy, developed by the XBRL US Standard Government Reporting Working Group. Mandating machine-readable data for municipal reporting would help elevate these existing efforts towards increased information transparency – and increased liquidity – in this area.

Read more here.

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