Muni Bond Fund Flows Plunge, but Remain Positive

Investor demand outlasted the end-of-summer doldrums with robust inflows to municipal bond mutual funds. But the past week saw those flows to weekly reporting funds fall to more modest levels.

Municipal bond mutual funds saw $256 million in inflows for the week ended Sept. 19.

That compares with net inflows of $820 million in the week ended Sept. 12, Lipper FMI numbers show.

For context, muni bond funds have seen inflows for 23 straight weeks. And there have now been positive flows to muni bond funds for 52 of the past 55 weeks.

For the year to date, weekly reporting muni bond funds have seen inflows to the tune of $35.2 billion, Lipper numbers show. That compares with $31.6 billion for the year to date through Aug. 8.

Investor demand met a surge in supply this past week, leading to a strong rally in tax-exempt yields over the past two trading sessions. The market had seen three straight weeks of scant volume. Muni yields narrowly outperformed those of Treasuries on the front and intermediate parts of the curve.

Traders also noted a week of decent activity in the secondary markets.

Assets for all muni funds that report their flows weekly rose after two straight weeks of falling, to $309.8 billion from $308.6 billion the week before.

The value of the holdings for weekly reporting funds climbed by $61.8 million. The week before, they plummeted by $752 million.

The four-week moving average for all municipal bond mutual funds that report their flows weekly saw $485 million of inflows, falling somewhat from a $523 million gain the week before.

Long-term bond funds that report their flows weekly saw meager inflows to the tune of $17.8 million, plunging from $298 million the week before.

High-yield muni funds saw outflows. Flows had been positive for 24 consecutive weeks, and 38 of the previous 39 weeks.

High-yield funds that report weekly saw $95 million in outflows, Lipper said. The previous week, they reported $112 million in inflows.

Assets for high-yield funds that report their flows weekly increased to $41.84 billion, down from $41.92 billion the week before.

The value of the holdings for weekly reporting high-yield funds rose by $18 million. Last week, they decreased by $78 million.

The four-week moving average for all high-yield municipal bond funds that report their flows weekly was $66.8 million of inflows, down from $132 million the week before.