The rate at which investors stuff money into municipal bond mutual funds continues to break every record.

Muni funds that report their figures weekly posted an inflow of $1.38 billion during the week ended Aug. 5, according to AMG Data Services.

That is the third-fattest inflow since AMG started tracking this data in 1992.

That figure includes only funds that report every week. Certain fund families report monthly figures.

AMG considers figures that incorporate flows over a period of at least a month to be more precise because it includes all funds.

On this basis, inflows have averaged $1.95 billion a week over the last four weeks, breaking the record set in May by $120 million.

The record four-week average before this year was $1.37 billion.

Funds have attracted $41.8 billion in cash from investors this year, a sum equal to almost a fifth of muni issuance so far in 2009. The industry's assets have grown 20% in 2009 to $410.2 billion.

Fund flows this year represent 25% of all net inflows since AMG data began in 1992.

Portfolio managers and fund trackers have cited a number of drivers for these flows, including expectations of higher taxes.

Some also say short- and intermediate-term muni funds - which have garnered the lion's share of the flows - are a logical stopover for cash that scurried to safe havens at the height of the credit crisis.

Bored with low yields on money market funds, that money is coming out of hiding in search of better returns.

Money market funds offer unimpeachable security and liquidity, currently at yields of small fractions of 1%.

According to EPFR Global, investors have withdrawn more than $200 billion from money market funds this year.

Withdrawals from tax-free money market funds have totaled $44.94 billion this year, according to iMoneyNet, including more than $13 billion in the past month.

The mutual fund inflow coincided with the Dow Jones industrial average hitting its highest level in nine months.

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