Dan Seymour

Municipal bond mutual funds continue to amass record quantities of cash from investors, building a pillar of demand for state and local government debt even as bond yields have never been lower.

Municipals surged to match record-high prices yesterday as many traders doubted whether the latest wave of new bonds can satiate a market still starved for paper.

The municipal market was mostly unchanged yesterday as a scarcity of supply, unprecedented flows into mutual funds, and minuscule yields on cash continued to bolster state and local government bonds at record-low yields.