Cash Inflows Keep on Trucking as Weekly Reporters See $277 Million

The flow of cash to municipal bond mutual funds continues to strengthen.

During the week ended June 2, investors entrusted $276.9 million to muni mutual funds that report their figures weekly.

All funds — including those that report once a month — have been posting net inflows at an average rate of $468.9 million a week for the past four weeks. That represents the briskest pace of inflows since March.

Continuing retail investor preference for municipal mutual funds, coupled with stellar performance in the municipal bond market, has fueled steady asset growth in the muni fund industry for a year and a half.

Since the beginning of 2009, municipal funds have commanded $96.36 billion in new money from investors.

With the S&P national AMT-free municipal bond index up 16.1% since the end of 2008, mutual funds have reported more than $53 billion in market gains during that period, including $7.5 billion in the past two months.

The fund industry’s assets have swelled to $497.38 billion today?? from $346.1 billion at the end of 2008, according to Lipper.

The retrenchment that has pulled many assets off recent highs in the past month has done little to deter the municipal market.

The yield on the triple-A rated 10-year municipal bond has dipped 12 basis points to 2.82% in the past month, according to Municipal Market Data.

This has helped keep the ratio of municipal yields to Treasuries fairly steady despite the huge rally in U.S. government debt in the first half of May.

Flows to high-yield funds remained positive last week, with a modest inflow.

Some state-specific mutual funds — namely ones devoted to New York and California debt — sustained outflows for the week.

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