The sell-off over the past two weeks has brought municipal bond prices to levels that, apparently, are more acceptable to investors. Consequently, muni bond mutual funds saw inflows, after a week of outflows.
The week ended Oct. 12 saw $84 million in inflows from muni bond funds that report their flows weekly, according to Lipper FMI.
In the week ended Oct. 5, there were net outflows of almost $113 million for muni bond funds that report their flows weekly.
Since Sept. 22, muni yields on the long end have risen in response to the Federal Open Market Committee’s decision to initiate Operation Twist. Also, the past two weeks have seen an upturn in large deals that have deluged the primary market.
The market had issues absorbing some last week, traders said. But this past week has seen a more positive, albeit still mixed, response to the new supply.
Money poured out of muni bond funds between mid-November and early June, often by more than $1 billion a week. In the week of Jan. 19, investors in weekly reporting funds pulled more than $4 billion.
Assets for funds that report their flows weekly fell for the second straight week to $333.6 billion from $335.2 billion the previous week.
The value of the holdings for weekly reporting funds plunged nearly a whopping $1.9 billion. The week before, they reported a large decrease of $1.6 billion.
The four-week moving average for all municipal bond mutual funds that report their flows weekly saw a $217 million inflow, down from a $313 million inflow the week before.
High-yield muni funds also saw inflows once again.
Weekly reporterssaw inflows of just $23 million, Lipper said. The previous week, high-yield funds cited outflows of $70 million.
Assets for high-yield funds that report their flows weekly continue to fall. They ended at $41.65 billion, down slightly from $41.89 billion the previous week.
The value of the holdings for weekly reporting funds fell by $256 million. Last week, they plunged by $225 million.
The four-week moving average for all high-yield muni bond funds that report their flows weekly was a $27 million inflow, down from $47 million the week before.