Municipal bond mutual funds attracted another influx of new money last week as the pace of flows into the industry continued to stabilize.
The muni fund sector’s assets have grown 8.4% this year to a record $504 billion.
Municipal funds that report their figures weekly posted a net inflow of $641.9 million during the week ended July 21, according to Lipper FMI.
This was the third straight weekly inflow north of $600 million, following a rare outflow the last week of June. Municipal funds reported an outflow only three weeks this year.
Funds also reported $1.1 billion in market gains.
Municipal funds continue to accumulate assets from two sources: inflows from investors and market gains on their holdings.
Last year, the funds reported $78.6 billion in inflows and $42.1 billion in market gains.
So far this year, funds have reported $21.4 billion in new money from investors and $16.3 billion in market gains, according to Lipper. Municipal bonds have returned 4.7% this year, based on the S&P AMT-Free National Municipal Bond index.
Both sources of asset growth have been steady.
Flows to the industry have been positive 26 out of 29 weeks this year, and the market value of funds’ holdings has climbed in 21 out of 29 weeks.
“The money keeps coming in,” said Phil Condon, who oversees municipal portfolio management at DWS Investments. “The flows have been positive and consistent.”
DWS Investments operates seven municipal bond mutual funds with more than $9.3 billion in assets.
Condon said investors are still plowing money into the sector despite jitters over municipal credit.
Bond funds continue to be perceived as something of a haven, according to Condon.
That status is also helping attract money to the sector despite low nominal yields.
The $1.2 billion DWS Intermediate Tax/AMT Free Fund, for instance, yields 3.35% based on the latest dividend, with an effective maturity of six years.
“Those who want safety are willing to pay up,” Condon said.
