Money continued to flood municipal bond mutual funds at a steady pace last week, as continuing concerns about state and local government credit and a hike in the Federal Reserve’s discount rate did little to deter investors.

Municipal funds that report their figures weekly posted an inflow of $481.7 million during the week ended Feb. 24, according to Lipper FMI.

This was a light inflow by recent standards. It was the lowest sum entrusted to the funds since the first week of the year, and the second-lowest since April of last year.

Still, this figure only includes weekly reporting funds, which constitute about two-thirds of the industry. All funds, including those that report their figures monthly, have reported an average of $1.22 billion in inflows a week for the past four weeks.

This is still high by historical standards. Before last year, a four-week average above $1 billion was rare.

The mammoth inflows that began last year propelled mutual funds to a more prominent role among buyers of tax-exempt municipal bonds.

At the end of 2008, mutual funds owned 14.5% of the $2.68 trillion of outstanding munis, according to the Fed. By the end of the third quarter of 2009, mutual funds owned 16.6% of outstanding municipal bonds.

Last year, mutual funds commanded $78.55 billion in new money from investors — topping the previous five years combined. The new money last year was enough to buy 20% of the tax-exempt bonds issued in 2009.

Funds have reported $10 billion in inflows so far this year, according to Lipper. Investors have given municipal funds enough money this year to buy 27% of all new the tax-exempt bonds issued so far this year, based on figures from Thomson Reuters.

By contrast, mutual fund inflows did not exceed 5% of new tax-exempt issuance in any of the five years prior to 2008.

Compounded with $4 billion in market gains, the assets of the industry’s roughly 600 funds have grown 2.8% this year, to $477.4 billion.

Dylan Cathers, an analyst with Standard & Poor’s Equity Research, said he is surprised inflows have remained  steady in the face of all the scary news about state and local government budgets.

The Nelson A. Rockefeller Institute of Government last week reported state tax revenue shrank 4.1% in the final quarter of calendar 2009, the fifth consecutive quarter of declines. The think tank predicted taxes would fall again this quarter.

Earlier in the month, the Pew Center on the States reported the results of a study that found a $1 trillion gap between what states had promised in retiree pension benefits and what they had set aside to pay those obligations.

Cathers said he still sees some ­municipal funds as worthwhile. Using a new Standard & Poor’s product called MarketScope Advisor, Cathers ranked munic funds according to several categories, including risk, performance, and cost.

MarketScope Advisor’s top picks were the Elfun Tax-Exempt Income Fund, the Fidelity Municipal Income Fund, and the Northern Tax-Exempt Fund.

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