Inflows Continue for 10th Consecutive Week, Though They Keep on Shrinking

Cash influxes into municipal bond mutual funds slowed again last week as the market continued to pummel state and local government bonds.

Investors entrusted $313.7 million to muni funds that report weekly figures during the week ended March 11, according to AMG Data Services. That was down from the previous week's inflow of $460.5 million.

Last week marked the lightest inflow since the week ending Jan. 28. The pace of inflows has decelerated by half in the past month.

Still, this was the 10th consecutive weekly inflow, according to the Arcata, Calif.-based fund tracker.

Muni funds have been cash-flow positive since the beginning of the year, following a devastating four-month period to close out 2008.

During that time, combined assets at all muni funds - including those that report figures monthly - shriveled to $337 billion from more than $397 billion.

Combined assets have rebounded to $364.45 billion.

Weakness in the underlying muni market persisted last week. During the seven days measured in this report, the yield on the triple-A in 10 years ticked up four basis points, according to Municipal Market Data. That yield is up almost 50 basis points in the month since Feb. 12.

The yield on the Bond Buyer 20-bond general obligation index jumped seven basis points last week.

Many participants in the muni market cite growing supply as a factor boosting yields. The 30-day visible supply of new issues on tap swelled to $16.1 billion last week, the highest level since January.

The continued weakness came during a relatively placid week for the broader markets. The Standard & Poor's 500 index gained marginally during the period measured in this report, at least temporarily halting a free-fall in stocks that has been virtually uninterrupted since the summer.

The VIX, a measure of volatility in stocks known as the "fear index," ebbed to 43.6 from 47.5.

Yields on seasoned triple-A rated corporate bonds ticked up three basis points, according to Federal Reserve data.

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