Market Post: Appetite for Munis Holds

Demand for municipal bonds held fairly steady even though it was the week leading into the Labor Day holiday.

Funds that report weekly indicated inflows slipped to $446.4 million for the week ending Aug.27, from $448.9 million the week before, according to Lipper FMI data.

Earlier this summer during the week of the Fourth of July holiday fund flows turned negative dropping to outflows of $790.3 million for the week ending July 9, from inflows of $193.6 million the week before.

A trader in Chicago attributed the municipal market's ability to weather the pre-holiday week to the $1.8 billion Detroit water and sewer deal that was priced late on Tuesday.

The deal was six times oversubscribed, and trading on the bonds stayed high when the deal entered its free to trade period.

The relatively stable fund flows are also unusual because issuance scheduled for this week is $2.5 billion, down from $3.5 billion last week, according to data provided by The Bond Buyer and Ipreo.

Investors predict issuance will remain low next week, because it is a shortened week.

Assets of all weekly reporting municipal funds rose to $298.5 billion, after reporting $297.3 billion last week. The four-week moving average inflow rose to $389.9 million from $383 million.

Long-term municipal mutual funds that report their flows weekly had an inflow of $288.4 million, following an inflow of $429.4 million the previous week, Lipper said.

Those assets stayed at approximately $160.9 billion, the same as the previous week. The four-week moving average of the long-term fund was an inflow of $239.9 million, up from $204.8 million last week.

High yield fund inflows declined to $229.8 million from $264.9 million the week before.

Assets increased to $458.5 billion from $454.5 billion. The four-week moving average was $230.3 million, up from $229.6 million.

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