Muni Bond Funds Report Biggest Outflow in Over 3 Years

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Municipal bond funds reversed course as investors pulled cash out, according to Lipper data released late Thursday.

Weekly reporters saw $3.011 billion of outflows in the week ended Nov. 16, after inflows of $62.837 in the previous week. This is the biggest outflow in more than three years, according to the release.

The election of Donald Trump as president has shocked the municipal world. Since Election Day, muni yields have risen as much as 55 basis points amid uncertainty over government spending and inflation.

"I was a little surprised by the amount but not the fact that it was outflows," said Dawn Mangerson, managing director and senior portfolio manager at McDonnell Investment Management. "Retail investors took money off table after pouring money in pretty much all year long, I would call that knee jerk reaction."

The four-week moving average fell to negative $734.368 million after first turning red at $15.457 million in the previous week. A moving average is an analytical tool used to smooth out price changes by filtering out fluctuations.

Long-term muni bond funds experienced outflows, losing $2.585 billion in the latest week after inflows of $19.396 million in the previous week. Intermediate-term funds had outflows of $332.967 million after inflows of $17.055 million in the prior week.

National funds had outflows of $2.685 billion after inflows of $57.695 million in the previous week. High-yield muni funds reported outflows of $1.585 billion in the latest reporting week, after outflows of $32.095 million the previous week. This is the biggest on record outflow for the high-yield sector, according to Lipper.

Exchange traded funds saw outflows of $212.832 million, after inflows of $25.475 million in the previous week.

"We are going to use this as an opportunity to book higher yield assets and I think other investors will be doing the same," she said.

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