Buy side

After a brief bounce in volume last week, the municipal market could be lulled back into its recent slumber as only $1.93 billion is expected to be priced in the primary this week, according to Ipreo LLC and The Bond Buyer.

Tax-exempt money market funds gained a bit, reversing last week’s losses by generating $137.8 million of new cash and pushing total net assets to $322.2 billion in the week ended March 21, according to the Money Fund Report, a service of iMoneyNet.com.

A noticeable surge in new issuance this week could jolt the municipal market out of its recent supply slump as estimated volume is expected to rise to $4.4 billion, according to Ipreo LLC and The Bond Buyer.

Tax-exempt money market funds lost $1.62 billion and total net assets fell to $322.1 billion for the week ending March 14 on the heels of modest inflows last week, according to the Money Fund Report, a service of iMoneyNet.com.

Investors will be hard-pressed to find any deals above $200 million this week as just a small handful of new financings are expected to crawl into the desolate primary market.

Tax-exempt money market funds saw modest inflows of $639.9 million in the week ended March 7, increasing total net assets to $323.67 billion, according to the Money Fund Report, a service of iMoneyNet.com.

Cash withdrawals from municipal bond mutual funds accelerated last week, proving that commitment from the retail community remains fragile even when muni bonds are doing ­better.

New volume will inch up slightly this week with several smaller financings dominating primary market activity, led by two sizeable general obligation deals in the Northeast that were priced for retail investors on Friday.

Municipal bonds have notched a good week as governments’ willingness to refrain from borrowing means investors with money to spend mostly have to chase existing bonds in the secondary market.

Tax-exempt money market funds declined by more than double the modest and short-lived inflows they enjoyed last week as $2.75 billion poured out and total net assets dropped to $323.03 billion for the week ended Feb. 28, according to the Money Fund Report, a service of ­iMoneyNet.com.

Some banks are taking a detour around the complicated and expensive process of guaranteeing a municipal government’s bonds by just buying the bonds themselves.

According to survey results released Wednesday, when RBC Capital Markets asked 100 state and local government experts at The Bond Buyer Texas Public Finance Conference last month whether they would buy municipal bonds for their own portfolios, all 100 said yes.

The pressure on municipal bond mutual funds is fading rapidly as a much less panicked tone in the state and local government debt market has stemmed the exodus of cash from the industry.

An already-skimpy municipal market is expected to see volume levels plummet even further this week when a paltry $1.79 billion of new issuance trickles into the primary, according to Ipreo LLC and The Bond Buyer.

Tax-exempt money market funds rose $1.14 billion to $325.79 billion in total net assets for the week ending Feb. 21, according to the Money Fund Report, a service of iMoneyNet.com.

The recent bout of panic selling by investors in municipal bond funds reflects several factors, including headline risk due to predictions of widespread defaults, rising interest rates, the extension of the Bush-era tax cuts, and rallying equities.

Two state-specific municipal bond portfolios managed by BlackRock Inc. were slated to be closed to investors effective Wednesday, a day after the firm began liquidating the funds' investments, according to a Feb. 18 addendum to the funds' prospectuses.

For all the headlines about the budget woes of state and local governments, banks see them as good clients. Most market experts say there are plenty of investment-grade municipalities to court.

Business as usual, in a market where banks have been complacent about their seemingly safe municipal bond holdings, would be big mistake, experts say.

The tide of cash washing out of municipal bond mutual funds continued to ebb last week as more and more of the “hot money” that flooded the industry the last two years seems to have escaped by now.