Municipal bond mutual funds continue to bore into uncharted territory at an unprecedented speed.

Muni funds that report their figures weekly posted inflows of $937.9 million during the week ended July 15, according to AMG Data Services.

That number only includes funds that report weekly. All muni funds - including those that report monthly - are pulling in cash at a rate of $1.42 billion a week, based on the four-week moving average.

Such a pace was unheard of until this year.

It would be hard to exaggerate the rate of flows into muni funds in 2009. Inflows over the last 26 weeks have exceeded inflows over any 52-week period since AMG started tracking the data in 1992.

This year's inflows exceed the market capitalization of MetLife Inc., the gross domestic product of Uruguay, and even California's budget deficit.

More than a fifth of all inflows since 1992 have come in 2009.

The industry's assets have grown by $59.68 billion since the beginning of the year, fueled by roughly $34 billion of inflows and $25 billion in market appreciation. That is 50% higher than the fastest pace of growth over that time frame before this year. Funds are on pace to attract $64.84 billion this year, which would be more than triple the highest annual take since 1994.

Municipal fund assets broke $400 billion for the first time ever last week. Assets have grown 19.2% since Dec. 17.

"They have been off the charts," said Dick Berry, a portfolio manager at Invesco AIM. "I would expect good, positive flows for some time to come."

Berry, who manages two muni funds with combined assets of about $1.1 billion, cited a number of factors forming an undercurrent for the wave of cash into muni funds.

Tens of millions of baby boomers are approaching retirement age and are switching to more reliable sources of income. Taxes are rising or expected to rise.

The Federal Reserve's campaign to pin interest rates to the floor is keeping Treasury yields low, making muni yields look more appealing by comparison.

The scare in markets last year dampened demand for riskier assets, coaxing money into the relative security of municipals.

So steadily has cash flooded muni funds this year that Matt Fabian, managing director at Municipal Market Advisors, wonders whether things have changed for good.

The flows this year "may be signaling a secular adjustment in investor behavior," Fabian wrote in a report last week.

"Flows into tax-exempt mutual funds have been so consistently large as to warrant consideration that these are secular reallocation trends by investors into fixed-income products," Fabian said.

Indeed, since January cash has flooded muni funds whether munis or Treasuries or stocks were doing well or poorly.

Scary headlines about California's budget have been enough to chase money out of California funds, but not out of other kinds of muni funds.

Berry said it would take "something catastrophic" to chill the enthusiasm over municipals.

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