Buy side

After 18 consecutive weeks of inflows in the market, and 29 weeks in positive territory out of the past 31, municipal bond mutual funds finally had a week of slight outflows.

The week started out solidly for the municipal market, marked by robust demand, rallying yields and accelerated primary deals. But as Treasury yields reversed course midweek, the muni market ground to a halt and even began to pull back from its gains.

Aurelius Capital Master Ltd. and UBS have withdrawn from suits against bond-insurer MBIA Inc.

Tax-exempt money market funds managed to reverse last week's outflows — but not by much — as they saw modest inflows of $600.6 million and total net assets inched up to $283.93 billion in the week ended April 9, according to the Money Fund Report, a service of iMoneyNet.com.

Analysts more than ever are monitoring the ebb and flow of cash into municipal bond mutual funds.

Despite the weakness in the municipal market last week, as well as the preceding week's sell-off, there is value and opportunity on the horizon in the tax-exempt sector, says a recent report from BlackRock Inc.

The culture of austerity that's taken hold at state and local governments across the country has put the squeeze on new money issuance through the first quarter of 2012, which was 2.8% lower than the same period last year.

Municipal bond mutual funds saw a week of slight inflows.

Though Moody's Investors Service says its possible downgrades of banks may have substantial impact on variable-rate demand bonds, outside experts are skeptical of this.

Moderately heavier issuance is expected to meet a municipal market loaded with cash and hungry for paper.

Muni yields and indexes have risen modestly since Friday, according to the Municipal Market Data scale. But traders throughout the week have remarked how the market seems stronger, as several larger deals arrived early and were well-received.

Current record-high gas prices are not hurting the credit quality of state highway user tax bonds, according to Standard & Poor's.

New rules went into effect Tuesday to make the $65 billion credit-default swap market for municipal bonds less risky and more efficient for investors.

Municipal bond defaults in early 2012 were up dramatically — or down dramatically — depending on how you look at the data.

Investment management firm Spring Mountain Capital is starting a high-yield and distressed municipal strategies group to invest in sub-investment-grade municipal bonds.

The municipal market should expect a welcome, though moderate, uptick in new issuance this week.

Tax-exempt money market funds saw outflows of $2.72 billion as total net assets decreased to $284.58 billion in the week ended March 26, according to the Money Fund Report, a service of iMoneyNet.com.

By most standards, the tax-exempt market has had a respectable week.

Many banks were aggressive buyers of municipal bonds in 2011, seeing value in high relative tax-exempt yields and stepping in to make direct purchases of debt.

The municipal market's primary calendar is braced for a week of low volume.