Cash influxes into municipal bond mutual funds accelerated last week as state and local government debt continued to gain traction among retail investors.

Investors entrusted $501.6 million to muni funds that report weekly figures during the week ended March 18, according to AMG Data Services.

It was the biggest inflow in four weeks, according to the Arcata, Calif.-based fund tracker.

Funds have enjoyed positive cash flow for 11 straight weeks, following a 15-week cash drain to close out last year.

Total assets at all muni funds, including those that report their figures monthly, are now at $363.9 billion, up from as low as $337 billion late last year. That number reflects both inflows and roughly $17 billion in market appreciation.

Investors have poured $10.28 billion into muni funds since the beginning of the year. Funds' assets have appreciated about $11.54 billion over the same period.

"Retail investors still have interest in the municipal market," said Jeffery Timlin, a portfolio manager at Sage Advisory Services in Austin. "Yield levels have come off their lows, so it's been attractive."

To start the week, 10-year triple-A munis yielded 3.33%, which was almost 50 basis points more than five weeks earlier.

The yield was back up to 115% of a 10-year Treasury yield. Yields on 10-year triple-A munis briefly ducked under the 10-year Treasury yield in February.

The attractiveness of municipal rates compared with benchmark rates like the Treasury yield continues to lure retail investors, according to Timlin.

The allure of munis compared with Treasuries grew even more last week, he said.

The Federal Reserve Wednesday announced it plans to buy $300 billion in long-term Treasuries to support credit markets. The idea is that by driving down rates on Treasuries, rates on bonds and other fixed-income investments become more compelling by comparison.

The 10-year Treasury yield plunged 46 basis points Wednesday, while the municipal yield was slow to follow suit.

The result was the ratio of muni yield to Treasury yield swelled to 133%, according to Municipal Market Data, the highest since Jan. 12.

The 10-year muni never yielded more than the Treasury until last year.

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