Markets

Despite speculation over what may befall the municipal market in the fourth quarter, portfolio managers and strategists are not letting concerns over the upcoming presidential election, potential tax reform, or an expected seasonal supply surge derail their plans for year-end investment strategies

Municipal bond mutual funds saw inflows for a 25th straight week. Funds that report their flows weekly recorded inflows of $553 million for the week ended Oct. 3, Lipper FMI numbers show.

Strong reception to new issues fueled the municipal market early in the week, while solid activity in the secondary market pressured yields midweek. Muni bond indexes covering all but the short end fell on the week, reflecting the fall in intermediate and long-term rates.

Modest inflows made their way into tax-exempt money market funds this week for the first time in nearly a month as $99.2 million crept into the market and total net assets settled at $268.41 billion in the week ended Oct. 1, according to the Money Fund Report, a service of iMoneyNet.com.

Fitch Ratings increased the rate of public finance downgrades in the second quarter of this year compared to the first quarter.

Moody's says a new form of commercial paper could provide a liquidity solution for variable-rate municipal issuers facing impending Basel III problems.

Ron Schwartz is director of the tax-exempt portfolio management at StableRiver Capital Management. He has managed the firm's High-Grade Municipal Bond and the Investment Grade Tax-Exempt Bond funds both since inception.

Anticipated municipal market issuance has leveled off for a third consecutive week. Potential volume for the week is expected to total $7.45 billion, down a couple of ticks from sales of $7.47 billion last week.

Municipalities eased off the throttle last month, marking the first break this year for increases in new issuance. Long-term muni bond volume for September fell 9% from the same period in 2011.