I have been involved with the MOB1 for almost twenty years. Not the Tony Soprano, organized crime version of the MOB, but the interest rate futures contract version. In July 1985, the Chicago Board of Trade introduced the Municipal Bond Futures Contract with the belief that there would be enough institutional demand within the municipal bond industry to have a more highly correlated interest rate futures instrument than the heavily traded Treasury bond contracts that were developed some ten years earlier. A year later, while working for a major Wall Street broker dealer, I was responsible for analyzing and using this new instrument both to hedge the firm’s municipal bond inventory and to actively trade the instrument from a proprietary perspective. One of the most common uses of the instrument was to trade municipal bond futures against Treasury bond futures. If investors believed municipal bonds were attractive relat ive to Treasury bonds, then they could execute more easily that trade in the futures market by buying municipal bond futures and correspondingly selling Treasury bond futures(i.e., they could trade the spread between the contracts). Early in the history of the Municipal Bond Futures Contract, this spread, which became known by the acronym MOB, was extremely volatile.

The MOB The TOB Big Picture Municipal Bonds Credit Quality...