Is the river of cash flooding municipal bond mutual funds slowing down? It ­depends how one interprets the ­numbers.

Municipal funds reported $1.12 billion in new money from investors during the week ended March 10, according to Lipper FMI.

That is the fattest slug of cash since October, when funds were bursting at the seams with record quantities of new money.

The truth is more complex than a single number.

This figure only tabulates new cash reported by funds that submit their figures weekly, which represent roughly two-thirds of the industry’s assets.

Some mutual fund families only report their figures once a month. For this reason, Lipper typically emphasizes the average weekly flow over the preceding four weeks, because it counts every fund’s contributions for the month.

Funds have reported an average of $1.18 billion a week for the past four weeks, seemingly the most lackadaisical pace since early February.

This figure also suggests an abrupt drop in flows from the $1.52 billion pace reported the previous week based on the four-week moving average. Again, the truth is more complex.

George Friedlander, head municipal strategist at Morgan Stanley Smith ­Barney, urges caution against reading too much into the previous week’s figure.

Lipper normally includes its once-a-month reporters in the first week of the month. That way, the monthly reporters are counted one time every four weeks.

In February, the monthly figures were tabulated in the second week of the month. As a result, of the four weeks that contributed to the four-week average in first week of March, two included weekly as well as monthly reporting funds.

That inflated the number, Friedlander said, and masked the reality that fund flows have been weakening significantly for several weeks.

The previous week’s figure that showed an uptick in flows was a mathematically induced illusion.

Armed with $69 billion in new cash from investors last year, mutual funds became a more significant presence in the municipal market.

At the end of 2009, mutual funds owned more than 17% of the approximately $2.8 trillion in outstanding municipal debt, according to the Federal Reserve, their most commanding share in more than a decade.

The industry’s assets have swelled 41% since the end of 2008, to $483.14 billion.

Now Friedlander sees the cash supporting the industry tapering off.

The reason this is cause for alarm is the drop is attributable to scrawny inflows to long-term funds, he said, and the long term is precisely where the funds are needed most.

Demand for short-term paper is robust and would be doing fine with or without these surging flows, he said.

Short-term funds, which manage less than 10% of the industry’s assets, are garnering nearly 60% of its new money.

Long-term muni funds manage more than half the industry’s assets, yet at the current pace they are commanding 15% of new inflows, based on the four-week average.

“I don’t know what’s going on with the long-term flows, except that they stink,” Friedlander said.

These flows may be evidence that the retail investor has begun to avoid long-term bonds, he said.

Not everything points to a decline, though.

According to the Investment Company Institute, funds reported more than $5 billion a week in inflows during the four weeks ended March 3, firmly on pace with the third- and fourth-quarter flows reported in 2009.

Alan Schankel, director of fixed income at Janney Montgomery Scott, suspects mutual funds may be enjoying a more prominent role permanently, not just as a result of a one-time surge in new money.

After the credit crisis incinerated most of the bond insurance industry, investors turned to mutual fund managers to perform the credit research that was previously taken for granted because of insurance, according to Schankel.

“People are buying more munis through funds, and funds are getting to be a bigger piece of the pie,” he said.

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