Markets

Shortening duration, buying premium bonds, and minimizing risk are three paths municipal managers are taking as the second half of 2014 gets under way in anticipation of higher interest rates.

Volume will inch up slightly from last week but remain relatively sparse as an estimated $5.81 billion makes its way to market, led by a $575 million Illinois Finance Authority revenue sale and a Rhode Island Tobacco Settlement Financing Corp. offering.

Inflows for all municipal bond funds fell off slightly this week from last week, but still remain fairly strong.

The Bond Buyer's muni bond indexes were mixed in the week ending July 31.

If the Puerto Rico Electric Power Authority were to fail to make loan payments to Citibank due on July 31, the consequences might spread beyond Puerto Rico bonds. Bad news on PREPA could also trigger a selloff of tobacco bonds, analysts speculated.

Analysts are conflicted over how investors should protect their 2014 returns and mitigate their interest rate risk for the rest of the year.

New-issue volume is expected to decline by around $2 billion this week, as a handful of deals from California, the District of Columbia and Illinois will vie for investors’ attention.

Municipal funds reported their highest inflows in 11 weeks.

Texas will provide nearly $6 million in subsidies for Charles Schwab Corp. to add a new center in El Paso and expand its Austin operation, Gov. Rick Perry said.

The Bond Buyer’s muni bond indexes strengthened in the week ending July 24.