James Ramage

Commercial banks have been increasing their municipal bond holdings so much, they're now on pace to surpass both money market funds and property and casualty insurers to become the third-largest holders of municipal securities in the $3.7 trillion market by the end of the year.

Strong demand for municipal bonds buoyed prices throughout the week. Muni Bond Buyer indexes fell noticeably, reflecting the lower rates.

Investor demand outlasted the end-of-summer doldrums with robust inflows to municipal bond mutual funds. But the past week saw those flows to weekly reporting funds fall to more modest levels, $256 million in inflows for the week ended Sept. 19.

Primary market volume should increase substantially this week. Potential issuance is expected to total $8.64 billion, up from total sales of $4.04 billion last week.

Municipal bond mutual funds saw $820 million in inflows into funds that report their flows weekly for the week ended Sept. 12.

Light supply and a perceived hesitation on investors' parts conspired to hold the municipal market to only modest outperformance against Treasuries this week.

The recent Berkshire Hathaway trade, sound technicals and a recent industry move to standardize contracts might increase interest in muni credit default swaps, which has suffered from apathy on the part of investors and a lack of price volatility to attract traders.

Robert John "Bob" Detjen, a financial advisor and forceful advocate of affordable housing, died earlier this month. He was 61.

The calendar for municipal bonds is proving slow to emerge from its late-summer hibernation. Potential volume for this week is expected to top out at $3.74 billion, up from total sales of just under $1.40 billion last week.

The municipal market outperformed the Treasury market on this sluggish holiday week by largely recording less significant backups in yields. Muni bond indexes were mixed, though mostly higher.

Flows into municipal bond mutual funds remained positive. Barely. Those funds that report their flows weekly saw $260 million of inflows for the week ended Sept. 5.

The municipal bond industry late last month lost long-time institutional salesman Edmund Bradford “Brad” Tazewell 3d. He was 54.

This week will be short on days and, yet again, slight of issuance for the municipal bond market. Industry calculations hold that muni bonds expected to be sold this week should total $1.89 billion, versus a revised $2.18 billion million last week.

Long-term municipal bond volume last month easily outstripped that of the same period in a relatively issuance-starved August 2011.

Many market participants may be on vacation, but there's still interest in municipal bond mutual funds. Flows to muni bond funds rose on the week, keeping their hot streak alive.

The municipal market may have been in holiday mode this week, but there has been noticeable activity by institutions in the secondary, traders reported. The week's light issuance in the primary market was well received, as demand remained robust for tax-exempts.

R. Seelaus & Co., a financial services firm based in Summit, N.J. enticed longtime municipal market industry veteran Steve McLaughlin to return to the trading and high net-worth-sales side of the industry following a move into research.

Demand for municipal bonds remains robust heading into the Labor Day holiday weekend even if expected issuance does not. Industry estimates hold that municipal bonds to be sold next week should total a paltry $1.55 billion, versus a revised $6.38 billion last week.

Plummeting Treasury yields pulled the tax-exempt market downward on the week, providing direction alongside active muni trading. Muni bond indexes past the short end fell several basis points on average.

Municipal bond mutual funds saw inflows fall by more than half the previous week's amount, dropping for the second straight week. But they've thus far remained positive through the summer lull.