Buy side

The flow of new cash into municipal bond mutual funds continued to recede last week as investors began to rediscover their appetite for risk.

Nearly all The Bond Buyer’s weekly yield indexes rose slightly as an influx of new-issue supply weighed on municipals.

CHICAGO — The continuing-care retirement community sector is starting to show signs of stabilization after suffering through two years of hardship, according to credit analysts.

Tax-exempt money market funds experienced significant outflows during the week ending Sept. 27, virtually mirroring the previous reporting period, as $2.73 billion fled the market, leaving the funds with $331.62 billion in total net assets, according to the Money Fund Report, a service of iMoneyNet.com.

CHICAGO — Municipal investors shouldn’t automatically shun an issuer’s debt due to a severe unfunded pension obligation without a more in-depth review that includes an issuer’s ability to address the liability, Nuveen Investments suggests in a new report on state and local pensions for investors.

Municipal issuers that are more likely to have trouble renewing bank guarantees supporting floating-rate debt face greater scrutiny from Moody’s Investors ­Service, the rating agency said in a report Wednesday.

The Manhattan Institute for Policy Research Wednesday released a report arguing that higher interest rates on taxable bonds issued by Illinois and California indicate they are more likely than other states to default on their debts.

State and local government tax receipts grew modestly in the second quarter of 2010 as an acceleration in consumer spending boosted sales tax revenue.

While municipal market professionals said they do not believe there is systemic risk in state and local government debt, there are underlying issues and credit challenges.

The return of bank profitability coupled with some of the provisions of the federal stimulus coaxed banks into buying state and local government debt in the first half of the year.

As the third quarter begins to wind down this week, long-term volume is expected to improve slightly, with several significantly sized deals from state and local governments contributing to $9.42 billion in estimated new issuance earmarked for pricing in the primary market, according to Ipreo LLC and The Bond Buyer.

The stream of cash running into municipal bond mutual funds continued to taper slightly last week.

The Bond Buyer’s weekly yield indexes declined this week as the municipal market rallied behind the economic warning the Federal Open Market Committee sounded Tuesday to end a weeks-long pattern of losses.

Pacific Investment Management Co.’s newest exchange-traded fund drags the active-versus-passive management debate into the taxable municipal bond space.

Outflows among tax-exempt money market funds more than doubled in the week ending Sept. 20 when $2.71 billion exited the funds and total net assets settled at $334.36 billion, according to the Money Fund Report, a service of iMoneyNet.com.

The Basel III bank capital requirements proposed earlier this month threaten to eviscerate the supply of eligible investments for tax-free money market funds — an industry already struggling with a severe supply shortage.

A fund devoted to investing in Build America Bonds would have a tough time avoiding debt backed by the states of California and Illinois altogether. Eaton Vance is doing its best.

Hospitals, universities and other not-for-profit issuers are enjoying exceptionally low ­borrowing costs and rampant demand for their debt. The only problem is it is not likely to last forever.

WASHINGTON — Mega muni investor Peter Kuhn is bullish on muni bonds, but says investors should be very careful about what they buy and issuers should provide more timely and informative secondary market information.

State and local governments’ outstanding debt shrank in the second quarter of 2010 for the first time in nearly 10 years as many of the facilities established during the prerefunding craze last decade matured.