Markets

Tax-exempt money market funds declined by more than double the modest and short-lived inflows they enjoyed last week as $2.75 billion poured out and total net assets dropped to $323.03 billion for the week ended Feb. 28, according to the Money Fund Report, a service of ­iMoneyNet.com.

Some banks are taking a detour around the complicated and expensive process of guaranteeing a municipal government’s bonds by just buying the bonds themselves.

According to survey results released Wednesday, when RBC Capital Markets asked 100 state and local government experts at The Bond Buyer Texas Public Finance Conference last month whether they would buy municipal bonds for their own portfolios, all 100 said yes.

The pressure on municipal bond mutual funds is fading rapidly as a much less panicked tone in the state and local government debt market has stemmed the exodus of cash from the industry.

An already-skimpy municipal market is expected to see volume levels plummet even further this week when a paltry $1.79 billion of new issuance trickles into the primary, according to Ipreo LLC and The Bond Buyer.

Tax-exempt money market funds rose $1.14 billion to $325.79 billion in total net assets for the week ending Feb. 21, according to the Money Fund Report, a service of iMoneyNet.com.

The recent bout of panic selling by investors in municipal bond funds reflects several factors, including headline risk due to predictions of widespread defaults, rising interest rates, the extension of the Bush-era tax cuts, and rallying equities.

Two state-specific municipal bond portfolios managed by BlackRock Inc. were slated to be closed to investors effective Wednesday, a day after the firm began liquidating the funds' investments, according to a Feb. 18 addendum to the funds' prospectuses.