Cash influxes into municipal bond mutual funds slowed a bit last week as a hot streak in munis cooled.
Investors poured $535.9 million into muni funds that report weekly figures during the week ended Feb. 18, according to AMG Data Services.
The seventh-straight weekly inflow represented a slowdown from the previous two weeks, when inflows exceeded $700 million.
The slowdown coincided with a hiccup in a rally in municipal bonds.
Munis were on a tear from mid-December through mid-February. The yield in 10 years on the triple-A yield curve scale squeezed to 2.84% from 4.21% during that time, according to Municipal Market Data.
The rally signaled a willingness among investors to take some mild risks. Yields on super-safe investments like Treasuries were minuscule, and investors began looking for better returns on investments that still offered sterling credit quality.
Because of this trend, earlier this month the yield on the 10-year triple-A ducked below the yield on the 10-year Treasury for the first time in four months.
The flight to safety resurfaced this month because of uncertainty over the direction of the economy and the stimulus package the federal government hopes will reinvigorate markets.
This pushed the yield on triple-A 10-years back up to 2.9% during the period measured by AMG. The10-year triple-A municipal once again yields more than its counterpart Treasury, an anomaly unheard of in munis until last year.
Stocks fell 5% during the period measured in the report and are down 14% for the year. Stocks have lost half their value since the peak in October 2007.
"The fear factor is still alive and well," said Dick Berry, a portfolio manager at Invesco AIM.
Municipal funds are nevertheless enjoying inflows this year after a bloodletting last year. Investors took money out of muni funds for 15 straight weeks at the end of 2008. Total assets at all muni funds - including those that report monthly - shrank to $341.9 billion in December from more than $390 billion in July, reflecting both market depreciation and outflows.
Assets have since rebounded to $364 billion.