No Break in Outflows for Muni Bond Funds

As the municipal market continues its struggles at the long end of the yield curve, investor demand remains tepid.

Municipal bond mutual funds that report flows weekly recorded outflows of $1.21 billion for the week ended Aug. 14, Lipper FMI numbers showed. Outflows extended into a 12th consecutive week, increasing from the previous one, when they measured $974 million.

Muni yields followed Treasuries higher throughout the week, but outperformed them during the selloff, Municipal Market Data numbers showed. The 10-year triple-A tax-exempt yield leaped 13 basis points on the week to 2.85%.

The 30-year yield rose nine basis points on the week to 4.37%. The two-year held steady at 0.43% for a 22nd straight session.

Muni ratios to Treasuries all dipped, but remain cheap across the yield curve, particularly at the short and long ends. The 10-year now sits at 103%. The two-year landed at 123%. The 30-year skipped down to 115%.

In general, muni paper with maturities under seven years performed the best, traders said.

Assets for all muni funds that report their flows weekly decreased to $290.9 billion, a sixth straight week of decline. The previous week they reported a $293.2 billion drop.

The value of the holdings for weekly reporting funds plunged $1.06 billion. The week before, they fell $1.12 billion.

The four-week moving average for all municipal bond mutual funds that report their flows weekly was $1.41 billion of outflows, compared with $1.50 billion of outflows the week before.

Long-term muni bond funds that report weekly experienced outflows of $903 million. They've seen outflows for 24 straight weeks, including $880 million last week.

High-yield muni bond funds that report flows weekly also recorded outflows for the week of Aug. 14, at $217 million - the 12th time in 13 weeks. That compares with $209 million they reported the previous week.

Assets for high-yield funds that report their flows weekly fell to $36.98 billion, from $37.46 billion the week before.

The value of the holdings for high-yield funds fell by $262 million. Last week, they fell by $253 million.

The four-week moving average for all high-yield municipal bond funds that report their flows weekly showed $309 million of outflows, from $317 million of outflows the week before.

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