What Is Visible Supply?
Let me tell you directly: visible supply is the amount of a good or commodity that's currently stored or being transported and is available to be bought or sold. This matters because it pinpoints a definite quantity of goods ready for purchase or delivery when futures contracts are assigned. For example, all the wheat in granaries or storage facilities, plus what's being transported from farms, makes up part of this visible supply.
In the municipal bond markets, the 30-day visible supply means the total par value—or face value—of all new issue municipal bonds expected to hit the market in the next 30 days.
Key Takeaways
- The visible supply refers to the quantity of some good or asset that is available for sale, or is en route to be available.
- In securities markets, such as for muni bonds, the visible supply refers to the total volume in dollars of municipal bonds with maturities of 13 months or more that are expected to reach the market over the next 30 days.
- The visible supply gives an indication of the supply side of the market.
Understanding Visible Supply
You know that prices in the market are determined by the law of supply and demand—the more supply of a good, the more it affects demand, and vice versa. So, accounting for the supply of commodities is crucial for these markets and their futures markets. Generally, an increase in visible supply is a bearish signal, while a decrease is bullish.
But remember, the price of a good isn't entirely influenced by visible supply alone. Commodities like wheat or oil are often bought through futures, options, or forward contracts well before physical delivery, so prices are more swayed by future supply than what's available right now. That future supply, which is in processing or preparation, is part of the invisible supply—it's not yet countable.
Visible vs. Invisible Supply
Visible supply contrasts with invisible supply, which is an unknown or unquantifiable amount of physical stock of a commodity that will eventually be available for delivery when a futures contract settles.
Unlike visible supply, this invisible amount exists but hasn't been accumulated, stored, or set aside for delivery yet; any stock that's already accounted for is the visible supply.
30 Day Visible Supply in Municipal Bond Markets
In municipal bond markets, the 30-day visible supply helps estimate the health of the market for new issues—it's an indicator of how much new debt is coming to market. You can find this published in The Bond Buyer, a trade publication for the municipal bond industry that started as a daily newspaper over 100 years ago and now offers sophisticated real-time market data through a subscription-based digital version.
An increase in the visible supply of bonds is bearish for prices because more bonds mean more supply of new debt. Similarly, a drop in the 30-day visible supply is bullish for bond prices.
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