Streak Ends as Lipper Reports Muni Outflows

bb102116lipper.jpg

After 54 straight weeks of inflows, municipal bond funds reported investor money leaving the industry, according to Lipper data released on Thursday.

The weekly reporters saw $135.937 million of outflows in the week ended Oct. 19, after inflows of $147.312 million in the previous week, Lipper said.

Analysts had predicted the streak would end around now, shy of beating the record of 63 weeks of inflows set in 2010.

"The end of inflow streak is not a surprise," said Alan Schankel, managing director at Janney Capital Markets. "There has been some heaviness in the muni market lately."

The four-week moving average remained positive at $250.058 million after being in the green at $413.441 million in the previous week. A moving average is an analytical tool used to smooth out price changes by filtering out fluctuations.

"Since mutual funds and similar vehicles account for more than a quarter of munis outstanding (per Fed data), they are an important factor," said Schankel. "Steady inflows mean steady demand which has helped, given the strong new issue supply this year."

He said that if flows continue to slow or turn consistently negative, and supply maintains current pace, ratios and other relative value measures may rise.

Long-term muni bond funds experienced outflows, losing $553.787 million in the latest week after outflows of $55.575 million in the previous week. Intermediate-term funds had inflows of $316.627 million after inflows of $130.884 million in the prior week.

National funds had outflows of $171.326 million after inflows of $105.906 million in the previous week. High-yield muni funds reported outflows of $460.438 million in the latest reporting week, after outflows of $247.536 million the previous week.

Exchange traded funds saw outflows of $109.062 million, after inflows of $138.071 million in the previous week.

"Investor caution is building ahead of a likely rate hike in December," Schankel said. "I don't think this means inflows are done in the current cycle, but rather that the pace has slowed and we'll see more volatility in flows data."

 

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