Markets

The return of bank profitability coupled with some of the provisions of the federal stimulus coaxed banks into buying state and local government debt in the first half of the year.

As the third quarter begins to wind down this week, long-term volume is expected to improve slightly, with several significantly sized deals from state and local governments contributing to $9.42 billion in estimated new issuance earmarked for pricing in the primary market, according to Ipreo LLC and The Bond Buyer.

The stream of cash running into municipal bond mutual funds continued to taper slightly last week.

The Bond Buyer’s weekly yield indexes declined this week as the municipal market rallied behind the economic warning the Federal Open Market Committee sounded Tuesday to end a weeks-long pattern of losses.

Pacific Investment Management Co.’s newest exchange-traded fund drags the active-versus-passive management debate into the taxable municipal bond space.

Outflows among tax-exempt money market funds more than doubled in the week ending Sept. 20 when $2.71 billion exited the funds and total net assets settled at $334.36 billion, according to the Money Fund Report, a service of iMoneyNet.com.

The Basel III bank capital requirements proposed earlier this month threaten to eviscerate the supply of eligible investments for tax-free money market funds — an industry already struggling with a severe supply shortage.

A fund devoted to investing in Build America Bonds would have a tough time avoiding debt backed by the states of California and Illinois altogether. Eaton Vance is doing its best.

Hospitals, universities and other not-for-profit issuers are enjoying exceptionally low ­borrowing costs and rampant demand for their debt. The only problem is it is not likely to last forever.