Investors continued to lavish heaps of cash on municipal bond mutual funds last week as people shrugged off the surge in Treasury yields and kept taking more risk.
Investors plowed $900 million into muni funds that report their figures weekly during the week ended June 10, according to AMG Data Services.
By at least one measure, this marks a retreat from an unprecedented rate of inflows. Last week was the first time in a month and half that weekly inflows did not exceed $1 billion.
This measure might be considered incomplete because it only counts funds that report their figures weekly, which represent about three-fifths of muni funds' assets.
Certain fund families report their figures monthly.
Bob Adler, president of AMG Data, considers the four-week moving average of inflows a more accurate gauge because every fund reports at least once a month.
On this basis, fund flows are still in record territory. Investors are pouring $1.83 billion a week into municipal funds based on the four-week moving average, just shy of the record $1.87 billion pace posted last month.
Until last year, the four-week average never exceeded $1.14 billion. The current rate of inflows is 61% higher than the record rate prior to last year.
These inflows are coming in the face of a sell-off in Treasury bonds, which has pushed the 10-year Treasury rate at one point above 4%, making other investments less attractive by comparison.
Markets nevertheless are zipping along. The Standard & Poor's 500 Index is up 40% since its nadir in March, oil touched $70 a barrel this month, and a measure of volatility known as the VIX last week clocked at 26.41, the lowest volatility reading since the day Lehman Brothers filed for bankruptcy protection in September.
EPFR Global in its weekly report said money continues to pour out of money market funds and "seed" stock and bond funds.
This has been a recurrent theme the past few months. Investors have been more willing to take money out of low-yielding safe havens like money market funds and Treasuries and put it to work.
Investors have pulled more than $100 billion from money market funds this year, according to EPFR.
The ascension of interest rates in the Treasury market has stalled muni funds' quest to break last year's record for assets under management.
Boosted by the rising Treasury yield, the yield on the benchmark 10-year triple-A muni has jumped almost 50 basis points since mid-May, according to the Municipal Market Data yield curve scale.
As a result, municipal funds have reported more than $3 billion in market losses in the past three weeks.
That has mostly offset the inflows. At $393.88 billion, fund assets are still $3.66 billion shy of the record set in September.