Second Heaviest Outflow of 2013 Hits Muni Bond Funds

The municipal bond market endured the second heaviest outflow of the year from muni bond funds this past week.

Investors pulled $2.24 billion from weekly reporting muni bond funds during the week ended July 31, Lipper FMI numbers showed, marking the 10th consecutive week of hemorrhaging. That compares with outflows of $1.23 billion for the week ended July 24.

Muni bond yields moved little throughout the week, falling at the start of the week and rising near the end. They outperformed Treasuries, which vaulted across the curve Thursday.

The 10-year triple-A yield skipped up two basis points on the week to 2.71%. The two-year held steady at 0.43%; the 30-year ticked up one basis point to 4.21%.

Meanwhile Treasuries jumped 14 basis points, two basis points and 11 basis points, respectively, over the same span.

Munis got more expensive to Treasuries as ratios dropped across the curve. The 10-year fell just below 100%. The two-year dropped to 126%, while the 30-year ratio fell to 112%.

Assets for all muni funds that report their flows weekly fell to $295.6 billion, a fourth consecutive week of decline. The previous week they reported $296.1 billion.

The value of the holdings for weekly reporting funds jumped $1.50 billion. The week before, they plunged $3.15 billion.

The four-week moving average for all municipal bond mutual funds that report their flows weekly was $1.56 billion of outflows, compared with $1.22 billion of outflows the week before.
Weekly reporting long-term muni bond funds extended their streak of outflows to a 22nd straight week, losing $1.69 billion. That compares with $953 million that left long-term muni bond funds the previous week.

High-yield muni bond funds that report flows weekly continued to see outflows for the 10th time in 11 weeks, at $580 million. The previous week, they reported $232 million in outflows.

Assets for high-yield funds that report their flows weekly fell to $37.92 billion, from the $38.04 billion reported the week before.

The value of the holdings for high-yield funds increased by $251 million. Last week, they fell by $678 million.

The four-week moving average for all high-yield municipal bond funds that report their flows weekly showed $316 million of outflows, compared with $136 million of outflows the week before.

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