Outflows from municipal bond mutual funds continued their stranglehold on the market as demand faltered for a 21st straight week.
Weekly reporting muni bond funds recorded outflows of $1.29 billion for the week of Oct. 16, Lipper FMI numbers showed. This represents the worst hemorrhaging since the week of Sept. 11, and an increase in outflows over the previous week, at $729 million.
But the picture belies a positive,
Earlier in the week, officials in Puerto Rico attempted to calm investors by ruling out bankruptcy as an option for the commonwealth's beleaguered issuers. By Thursday, Puerto Rico paper traded as much as 25 basis points firmer, traders said.
Still, muni yields underperformed Treasuries, rising across all but the front of the curve on the holiday-shortened week. The 10-year triple-A yield rose two basis points over the span to 2.62%.
The 30-year climbed four basis points to 4.22%. The two year held at 0.35% on the week.
Muni ratios to Treasuries also rose on the week, pushing munis cheaper to their taxable counterparts. The 10-year ratio rose four percentage points to 101%. The two-year climbed six points on the week to 106%. The 30-year increased three percentage points to 115%, a level traders said approaches that which would draw in crossover buyers.
Assets for all muni funds that report their flows fell for a third consecutive week to $278.6 billion. During the previous week they decreased to $281.5 billion.
The value of the holdings for weekly reporting funds decreased by $1.54 billion. The week before, they fell by $510 million.
The four-week moving average for all municipal bond mutual funds that report their flows weekly was $718 million of outflows, against $670 million of outflows the week before.
Long-term muni bond funds that report flows weekly continued their cold streak. They recorded outflows a third straight week at $689 million. The previous week, they showed $525 million in outflows.
Prior to the week of Sept. 25, long-term muni bond funds had recorded 29 straight weeks of outflows.
High-yield muni bond funds that report flows weekly had outflows for a second consecutive week, at $166 million. They recorded $86 million of inflows the previous week.
Assets for high-yield funds that report their flows weekly fell to $35.94 billion, from $36.42 billion the week before.
The value of the holdings for high-yield funds fell by $322 million. Last week, they decreased by $114 million.
The four-week moving average for all high-yield municipal bond funds that report their flows weekly showed $45 million of inflows, versus $132 million of inflows the previous week.
