After breaking every record for garnering new money from investors in 2009, municipal bond mutual funds kicked off 2010 by taking in still more.

Muni mutual funds that report their numbers weekly posted an inflow of $481.4 million for the week ended Jan. 6, according to Lipper FMI.

This was the lightest weekly inflow since April.

The number, though, only includes funds that report once a week. Certain fund families report their numbers once a month.

For this reason, Lipper considers the average flow over the past four weeks a better indicator of trends.

For all funds, including those that report monthly, inflows have averaged $1.15 billion a week for the past four weeks, still historically high.

The roughly $468 billion municipal mutual fund industry rose to new prominence last year.

Armed with $78.55 billion in new money from investors plus $42.12 billion in market gains, funds wielded enormous buying power even as the market suffered from a shortage of tax-exempt paper.

Mutual funds owned 16.6% of the $2.77 trillion in outstanding municipals at the end of the third quarter, according to the Federal Reserve. That is the highest share of ownership since 1993.

In a white paper published last week, the municipal team at DWS Investments asserted that record-setting demand for municipal bond funds from retail investors was in part responsible for the rally in munis last year.

“The impact of strong retail buying has influenced the magnitude and characteristics of the municipal bond rally,” wrote the authors of the report, who include Phil Condon, head of municipals at DWS. “Retail investors have helped to drive up the price of high-quality, short-to-intermediate-term munis.”

Municipal bond mutual funds delivered returns of 15.5% in 2009, according to Lipper.

DWS Investments credited the prospect of higher taxes, eagerness for relatively safer investments, and unacceptable returns on short-term safe haven investments for the momentum.

Jeff Tjornehoj, research manager at Lipper, said the strong 2009 needs to be put into perspective.

Some of the rally in 2009 was just a recovery from the decimation in 2008, he said.

Last year’s performance “was the kind of bounce you get when a superball is dropped from a high location,” he wrote in a report last week.

A good illustration of this phenomenon is high-yield municipal bond funds, which racked up a “spectacular performance” with 30.8% returns in 2009, according to Tjornehoj.

The $46.6 billion municipal high-yield fund sector’s “jaw-dropping returns,” though, do not seem so impressive when one considers that high-yield munis are actually down 1.8% over the past two years, he said.

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