Buy side

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.

Tax-free money market funds took in $82.8 million and settled with $309.12 billion in the week ended May 23, according to the Money Fund Report, a service of iMoneyNet.com.

For portfolio managers of municipal bond funds, the past several months haven’t been for the faint of heart. Still, muni fund managers report mixed experiences in riding out the prolonged flood of outflows.

On the heels of a month-long rally in the municipal bond market, some yield-seeking institutional and retail investors are turning to riskier credits to get their fix.

Outflows from municipal bond mutual funds may be coming to an end, depending on where one looks for U.S. fund flow numbers.

Despite attractive borrowing rates, issuers continue to hold back, with new-issue volume slipping for a third week, putting it on schedule to be the fourth-slowest so far this year.

Municipal bond mutual funds had net outflows of $108 million in the week ended May 18, according to Lipper FMI.

The influx of cash into tax-free money market funds last week proved to be short-lived as assets fell $914.9 million to $309.04 billion for the week ended May 16, according to the Money Fund Report, a service of iMoneyNet.com.

The popularity of direct loans and purchases of variable-rate debt continues to grow. But as more bank credit facilities for VR debt come due this year for municipal issuers, the alternative financing products present numerous risks that issuers must monitor, according to a new report by Standard & Poor’s.

New muni issuance is edging up.

Reversing a trend of outflows, tax-exempt money market funds raked in $3.33 billion to end the week of May 9 with $309.95 billion in total net assets, according to the Money Fund Report, a service of iMoneyNet.com.