Dwindling yields on municipal bonds have done nothing to deter investors from continuing to sock away unparalleled sums of cash into municipal bond mutual funds.
Yields of virtually all stripes at all maturities have been tumbling, in some cases to their lowest on record.
The yield on one-, five-, 10-, and 20-year triple-A munis are all at record lows, according to the Municipal Market Data yield curve.
So are the yields on the double-A 10-year and double-A 20-year.
Much of the extra yield compensating bondholders for taking risks on lower-quality municipals has also evaporated. The spread of the single-A 10-year over the triple-A 10-year has been shaved by nearly 40 basis points in the past month.
None of which has repelled investors from the sector.
Investors entrusted $1.85 billion to municipal bond mutual funds that report their figures weekly during the week ended Sept. 23, according to Lipper FMI.
No other weekly bestowal has come close to that in the 18 years Lipper has been tracking this data. The latest inflow tops last week's record of $1.52 billion. The record before this year was $1.47 billion.
These figures include only funds that report their figures weekly. Some funds, constituting more than a third of the sector, only report once a month.
For this reason, Lipper considers the average weekly inflow over a four-week period the best indicator of trends in fund flows. Investors have poured $2.7 billion a week into muni funds for the past four weeks, according to Lipper, which is almost double the record prior to this year.
Between the beginning of this decade and the end of last year, mutual funds collected from investors an average of $166.3 million a week.
This year, they have collected an average of $1.5 billion a week.
Muni fund assets have grown by 30% this year, to $444.43 billion, by far the most the sector has ever managed.
Aside from new money from investors, funds have also been benefiting from market gains on their holdings, Lipper data show.
Over the last eight weeks, funds have reported an average of $2.51 billion a week in inflows, and $2.47 billion a week in market gains.
Lately flows have been so fierce many traders and analysts say funds have to buy bonds even if they do not like the yields.
That has helped establish a ballast for the municipal market even when many analysts say yields are too low.
In its weekly report, EPFR Global said mutual funds continue to reap the cash fleeing money market funds.
Money market funds are conservative, liquid instruments synonymous with cash.
The average tax-free money market fund yields just 0.06%, according to iMoneyNet. Coupled with a heartier appetite for risk, low yields have chased $356 billion from money market funds this year, according to the Investment Company Institute.
Much of that money is landing in mutual funds, EPFR said.
Tax-free money market funds, which invest in municipals, have bled $66.49 billion this year. Many analysts say it makes sense that much of the $57.16 billion landing in municipal mutual funds has come out of that.
Nearly every day the updated assets of the biggest muni funds are a sea of green. Nineteen of the 20 biggest municipal bond mutual funds are at their fattest net asset values in at least a year.
The biggest muni fund - Vanguard Intermediate-Term Tax-Exempt Admiral Shares, with $24.7 billion in assets - is the most valuable since February 2005.
Vanguard's limited-term fund, which is the fourth-biggest muni fund at $11 billion in assets, is at its richest asset value since April 2004.