Outflows Continue for 20th Week

For the 20th consecutive week, investors pulled money from municipal bond mutual funds.

Weekly reporting muni bond funds recorded outflows of $729 million for the week of Oct. 9, the latest Lipper FMI numbers showed. That compared with $690 million that left muni funds the previous week.

The market registered the effects of investors' concerns and uncertainty regarding the debt ceiling and government shutdown crisis in their limited activity and interest in the primary and secondary. Investors showed some alarm about price declines in Puerto Rico bonds following negative comments from a hedge fund manager, a commonwealth of Massachusetts official's inquiry into the state's exposure and last week's downgrade of the territory's Sales Tax Financing Corp.

Triple-A tax-exempt yields since last Friday rose beyond the front end of the curve. The 10-year muni yield jumped six basis points over the span to close at 2.60%.

The two-year dipped two basis points to 0.35%. The 30-year rose seven basis points on the week to 4.18%.

Treasury yields increased across the curve on the week, including a 12 basis points jump for the benchmark 10-year, which closed Thursday at 2.69%. Most muni ratios to Treasuries moved into richer territory.

The two-year ratio finished the week down 12 percentage points to 100%. The 10-year slipped two percentage points to 97%. The 30-year ratio closed out the week at 111%.

Assets for all muni funds that report their flows fell to $281.5 billion. During the previous week they decreased to $283.2 billion.

The value of the holdings for weekly reporting funds decreased by $510 million. The week before, they increased by $477 million.

The four-week moving average for all municipal bond mutual funds that report their flows weekly was $670 million of outflows, against $963 million of outflows the week before.

Long-term muni bond funds recorded outflows of $525 million for the week of Oct. 9. The previous week, they showed $353 million in outflows.

Prior to the week of Sept. 25, long-term muni bond funds had recorded 29 straight weeks of outflows.

Following three weeks of inflows, high-yield muni bond fund flows slipped into the red. Those funds that report flows weekly saw outflows of $86 million for the week of Oct. 9. They recorded $33 million of inflows the previous week.

Assets for high-yield funds that report their flows weekly fell to $36.42 billion, from $36.62 billion the week before.

The value of the holdings for high-yield funds decreased by $114 million. Last week, they increased by $130 million.

The four-week moving average for all high-yield municipal bond funds that report their flows weekly showed $132 million of inflows, versus $111 million of inflows the previous week.