Investors Still High on Muni Bond Funds

Investors don’t see too many avenues for yield in the financial markets these days. But municipal bond mutual funds must still look attractive to them, because they continued to pour money into them for a second straight week.

Falling on the heels of their heaviest inflows since March 2010, muni bond funds saw in the week ending Dec. 14 roughly $460 million in inflows from those funds that report their flows weekly, according to Lipper FMI. In the week ending Dec. 7, there were net inflows of almost $1.4 billion.

Munis had a moderately strong week. Investors’ pockets were still stuffed with reinvestment cash from December and January coupon payments and maturing debt. And they still needed to put the money to work. But though the muni primary market this past week was estimated to total about $5.7 billion, yields only firmed a modest amount amid investors’ scramble for deals before the holidays seal the pipes for a while.

But those same investors remember well the months when money left muni bond funds as though through a sieve between mid-November 2010 and early June, often by more than $1 billion a week. In the week of Jan. 19, investors in weekly reporting funds withdrew more than $4 billion.

Assets for funds that report their flows weekly rose to $269.4 billion from $268.5 billion the previous week. Just over a month ago, a large asset manager that had been supplying weekly numbers stopped, Lipper reported. That is said to account for much of the recent pronounced plunge in fund assets.

The value of the holdings for weekly reporting funds rose by $506 million. The week before, they increased by a whopping $1.87 billion.

The four-week moving average for all municipal bond mutual funds that report their flows weekly saw a $334 million inflow, down slightly from $344 million inflow the week before.

High-yield muni funds saw a second consecutive week of inflows this past week after two straight weeks of outflows.

Funds that report weekly saw inflows of $90.5 million, Lipper said. The previous week, high-yield funds reported inflows of $56.5 million.

Assets for high-yield funds that report their flows weekly rose for a second straight week after three weeks of decreases. They ended at $33.70 billion, up from $33.55 billion the previous week.

The value of the holdings for weekly reporting funds rose by $59.1 million. Last week, they increased by $268.2 million.

The four-week moving average for all high-yield muni bond funds that report their flows weekly was a $24.1 million outflow, up from a $34.6 million outflow the week before.

For reprint and licensing requests for this article, click here.
Buy side
MORE FROM BOND BUYER