Buy side

The tax-free money market fund industry continues to shrink rapidly, squeezing what had been a major source of short-term credit for municipalities and arguably leading to higher borrowing costs for state and local governments.

Municipal credit analysts are spending more time evaluating a risk few used to give much thought to: a municipality's loss of market access for refinancing short-term debt.

Investors continued to ferry cash out of their municipal bond mutual funds at historic rates last week as a tumultuous sell-off sowed fear among buyers.

The flood of new supply that has inundated the municipal bond market the past month will die out this week as issuers take a breather from selling new debt.

The Bond Buyer’s weekly yield indexes increased this week, due largely to substantial weakness on Monday and Tuesday.

Tax-exempt money market funds lost a sizable $2.09 billion, dropping total net assets to $326.88 billion for the week ending Dec. 13 and erasing nearly all gains from the previous week, according to the Money Fund Report, a service of iMoneyNet.com.

The municipal market has become so turbulent and illiquid that even investors who find tax-exempt yields appealing are sitting on their hands. The recent rout in tax-exempt bonds has some portfolio managers, investors, and dealers beginning to sniff at yield levels that could invite buyers back into the market.

A change in the methodology the Federal Reserve uses to measure who owns municipal bonds has masked the growth in foreign ownership of state and local government debt.

Municipal bond mutual funds are hemorrhaging cash at historic rates due to a fearful investor reaction to the public drubbing of state and local government debt.

More than $10 billion of new volume is expected to arrive in the municipal market this week on the heels of the price stability that followed some volatility last week.

After two weeks of outflows, tax-free money market fund assets recouped some of those losses in the week ending Dec. 6, rising $3.41 billion to $328.97 billion, according to the Money Fund Report, a service of iMoneyNet.com.

The Bond Buyer’s weekly yield indexes increased this week as the absence of an extension of the Build America Bond program in a new tax bill led to two ­consecutive mid-week routs that brought 20-year yields to a 17-month high.

Chicago-based Loop Capital Markets LLC has hired James C. Johnson as its general counsel.

PFM Group announced last week that Robert W. Crispin, the former chairman and chief executive of ING Investment Management Americas, has joined its board of directors.

The exodus of cash from municipal bond mutual funds has slowed down as the November spike in yields attracted buyers back into the market, following a few frightening weeks of outflows.

In the wake of November’s hefty volume and the sell-off it helped precipitate, the market is poised for an estimated $12.11 billion of supply this week as issuers continue to race the clock against the impending expiration of the Build America Bonds program, according to Ipreo LLC and The Bond Buyer.

This week didn’t exactly seem like an ideal time to float a tobacco bond.

Tax-exempt money market funds lost cash for a second straight week as investors withdrew $1.77 billion, leaving $325.56 billion in total net assets for the week ending Nov. 29, according to the Money Fund Report, a service of iMoneyNet.com.

The Bond Buyer’s weekly yield indexes were mixed this week as tax-exempts erased early-week gains with Treasury-driven losses Wednesday and Thursday.

Issuers in the Midwest and Northeast are expected to serve up a meaty $11.27 billion of post-holiday fare in the municipal market this week, according to Ipreo LLC and The Bond Buyer, as they hope to take advantage of last week’s firmness following recent supply and pricing ­volatility.