Retail investors shrugged off the panic plaguing most of the world’s financial markets last week and poured more cash into municipal bond mutual funds.
Municipal funds that report their figures weekly posted a net inflow of $118.1 million during the week ended May 5, according to Lipper FMI. Among all funds, including those that only report once a month, the net inflow was $432.9 million.
Funds have reported an average of $250.3 million in inflows a week for the past four weeks, which is the slowest pace of inflows since January 2009.
Still, last week’s pace did not slow significantly despite massive selling across most global markets. The Dow Jones industrial average sank 1.6% during the week measured in the latest Lipper report, which ended the day before Thursday’s wild tailspin.
The VIX, a measure of volatility published by the Chicago Board Options Exchange, on Thursday spiked above 40 for the first time since April 2009.
The yield on the 10-year Treasury bond plunged nearly 40 basis points in less than two weeks as jitters over Greek’s sovereign debt triggered a flight to safety.
Through all this the municipal market has kept an even keel.
On Thursday — a day in which 90% of stocks traded on the New York Stock Exchange fell — the biggest municipal bond exchange-traded fund, the iShares S&P AMT-Free National Fund, gained 4 cents to $103.94. It is off its all-time high by only 24 cents.
In fact, during the week ended May 5 municipal funds reported $2.21 billion in market gains, the best week in two months.
Coupled with the inflows, market gains have propelled the municipal fund industry to a record $490 billion in assets.