Buy side

Bondholders, rating agencies and financial advisers may have never heard of the city of Portent Falls, but that's because it is the fictional municipality whose contentious bankruptcy case will be the focus of a free workshop aimed at bringing the financial, legal and negotiating issues of a major muni restructuring to light.

BRADENTON, Fla. — The fiscal distress in Jefferson County has elicited renewed calls from a financial analyst for investors to be cautious when buying debt sold by issuers from Alabama.

With tax-exempt yields at or near 2011 lows, investors have been balking at stingy nominal yields in recent weeks. But ­strategists say buying ­opportunities abound for those willing to buy lower-rated bonds.

Investors this past week returned to their acquired habit of pulling money out of municipal bond mutual funds.

The municipal market can expect about $5 billion in new issuance this week, making it the third week in a row to see volume at that relatively subdued level. Last week saw a revised $5.11 billion, following a revised $7.8 billion the week before.

After pulling in $2.98 billion last week, tax-exempt money market funds lost $1.84 billion and settled with $307.71 billion in total net assets for the week ended June 13, according to the Money Fund Report, a service of iMoneyNet.com.

The Bond Buyer's weekly yield indexes suggest the municipal market remains healthy heading into summer. Indexes were steady or a bit firmer this week even as the market digested more supply in the first two weeks of June than any comparable other period in 2011.

The hemorrhaging of cash from municipal bond mutual funds finally stopped in the week ended June 8.

The municipal market can expect $5.22 billion in new issuance this week, with issuers in Los Angeles and Utah leading the way with deals in excess of $600 million.

Numbers from the Federal Reserve's flow of funds for the first quarter this year place total muni bond debt at $2.905 trillion. That compares to $2.925 trillion in the last quarter of 2010, according to Fed numbers, and $2.843 trillion over the same period last year.

Municipal bond index yields fell modestly over the week. Rates measured by the one-year note, as well as 11- and 20-year bond indexes slipped by up to two basis points.

Tax-exempt money market funds regained all of last week's losses — and then some — as $2.98 billion of inflows brought total net assets to $309.55 billion for the week ended June 6, according to the Money Fund Report, a service of iMoneyNet.com.

When the Build America Bond program ended there were two schools of thought. One argued that BABs would become an orphan class, with prices in the secondary market suffering from illiquidity. Another group thought there would be some scarcity value to the product and they would appreciate in value.

Individual investors pulled cash from municipal bond mutual funds for the 29th straight week, according to Lipper FMI. While the rate of withdrawals appeared to be slowing in early May, the pace has picked up again since then.

The municipal market can expect $4.68 billion in new issuance this week, with a half dozen deals above $250 million contributing to volume and putting the projected total around the average for the year.

All of The Bond Buyer’s long-term weekly yield indexes declined this week, powered by light issuance and predictions of strong seasonal cash inflows.

Market participants say buyers will face slim pickings as they attempt to reinvest a flood of cash from called or maturing bonds during the summer reinvestment season.

Bank credit facilities used to roll over variable-rate debt have so far been up to the task of handling the initial wave of enhancements that has been expiring this year.

Investors continue to withdraw money from municipal bond mutual funds. Muni bond funds that report their flows weekly had net outflows of $296 million in the week ended May 25, according to Lipper FMI.

The municipal market can expect $2.5 billion of new issuance in a holiday-shortened week, including two sizeable New York deals, but that’s not enough to keep up with last week’s revised $4.3 billion total, which was up from a revised $3.9 billion the week before, according to Ipreo LLC and The Bond Buyer.