Markets

The week started out solidly for the municipal market, marked by robust demand, rallying yields and accelerated primary deals. But as Treasury yields reversed course midweek, the muni market ground to a halt and even began to pull back from its gains.

Aurelius Capital Master Ltd. and UBS have withdrawn from suits against bond-insurer MBIA Inc.

Tax-exempt money market funds managed to reverse last week's outflows — but not by much — as they saw modest inflows of $600.6 million and total net assets inched up to $283.93 billion in the week ended April 9, according to the Money Fund Report, a service of iMoneyNet.com.

Analysts more than ever are monitoring the ebb and flow of cash into municipal bond mutual funds.

Despite the weakness in the municipal market last week, as well as the preceding week's sell-off, there is value and opportunity on the horizon in the tax-exempt sector, says a recent report from BlackRock Inc.

The culture of austerity that's taken hold at state and local governments across the country has put the squeeze on new money issuance through the first quarter of 2012, which was 2.8% lower than the same period last year.

Municipal bond mutual funds saw a week of slight inflows.

Though Moody's Investors Service says its possible downgrades of banks may have substantial impact on variable-rate demand bonds, outside experts are skeptical of this.

Moderately heavier issuance is expected to meet a municipal market loaded with cash and hungry for paper.