Municipal bond fund flows turned negative for the week ending April 30, as funds reported $26.38 million of outflows.
The outflows followed $244.3 million of inflows the previous week, according to data provided by Lipper FMI.
"I wouldn't make too much of this one week's data," a trader in California said. "There would have to be a trend for it to be significant. Municipal fund flows have been positive most of the year."
Funds have reported inflows in all but for six of the 18 weeks so far this year. Before this week fund flows had been positive for three straight weeks.
"[Outflows] have got to be a function of absolute yield levels," another California trader said. "Yields are so low."
Dorian Jamison, municipal analyst at Wells Fargo Advisors, said in a report released on Friday that yields are low because there has been strong demand and below average supply of municipal bonds this year.
"As of April 28, the municipal bond market was up 4.6 percent year-to-date after declining 3.2 percent in 2013, as measured by the S&P National AMT-Free Municipal Bond Index," Jamison said in the report.
Bond sales totaled $86.76 billion for 2014 as of April 30, compared to $122.72 billion for the same period in 2013, according to data provided by Ipreo and The Bond Buyer. Volume for next week is projected to remain low next week at $3.92 billion, down from a revised $6.2 billion this week.
"People think yields will go higher at some point, they are thinking 'why get long at these paltry levels'," the second trader in California said.
The fund flows' four-week moving average rose to $141.4 million from $127.7 million last week, while total assets increased to $286.4 billion from $285.3 billion.
Municipal high-yield funds reported inflows of $244.1 million, up from $233.8 million last week. These funds have had inflows every week in 2014 except for the week ending Jan. 1.
High-yields' four-week moving average also grew to $275.2 million from $260.7 million, and the funds' total assets jumped to $414.2 billion to $408.9 billion the prior week.
Long-term municipal funds reported inflows of $56.2 million down from a mere $245.2 million last week.
Their four week average rose to $251.2 million from of $248.3 million the week ending April 2. Total assets jumped to $154.3 billion from $153.5 billion the week before.
