Buy side

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.

The sell-off in municipal bonds finally appeared to sap some retail demand for state and local government debt last week as muni mutual funds reported taking in the paltriest amount of new money in six weeks.

A pair of billion-dollar deals — one in Texas and the other in Utah — will be part of an estimated $7.92 billion expected to be priced in the primary market this week, according to Ipreo LLC and The Bond Buyer. The mammoth deals will help pump some life into what has recently been a lackluster municipal market that’s short on volume.

Most of The Bond Buyer’s weekly yield indexes declined slightly, as the longer end of the curve ended the week flat to slightly firmer while the short end lost ground.

Tax-exempt money market funds slipped $1.08 billion to $337.07 billion for the week ending Sept. 13 after experiencing their first inflows in nearly a month the week before, according to the Money Fund Report, a service of iMoneyNet.com.

Harrisburg, Pa.’s near-miss on its general obligation debt, Warren Buffett’s gloomy foreshadowing of a “terrible problem,” and flirtations with a double-dip recession have not much changed the tenor of analysts’ expectations for the strength of municipal credit.

A component of the Basel III banking regulatory package would make it more expensive for banks to guarantee municipal debt, possibly limiting options for municipalities seeking to sell bank-supported debt.

Three sizable Ohio deals, a large New York City utility financing, and a two-pronged Texas education sale greet investors as part of an estimated $6.72 billion of new issues in the first full week of trading and underwriting after the late summer holidays, according to Ipreo LLC and The Bond Buyer.

Retail investors ignored the pullback in the state and local government debt market last week, ­committing the third-heaviest slug of new money to ­municipal bond mutual funds this year.

Tax-exempt money market funds managed to attract inflows for the first time in nearly a month, adding a modest $244.5 million for the week ended Sept. 6 to finish with $338.1 billion in total net assets, according to the Money Fund Report, a service of iMoneyNet.com.