Buy side

Nearly all The Bond Buyer’s yield indexes rose this week, as tax-exempts weakened throughout the holiday-shortened week, erasing some of the pronounced gains taken in August.

A grand-slam judgment last month has emboldened the lawyers and investors seeking to recoup losses on $2 billion in municipal arbitrage funds run by Citigroup.

Investors continue to stuff cash into municipal bond mutual funds, exacerbating a supply-demand imbalance that has kept yields on tax-exempt bonds near historic lows.

With much of the market still in vacation mode following Monday’s Labor Day holiday, Minnesota plans to issue $899.6 million of general obligation bonds in the only sizable deal expected to arrive this week.

The dearth of tax-exempt issuance and exodus of investors from volatile equity markets have translated into lower yields across the curve in the traditional municipal market, prompting some analysts to question whether long-bond buyers will continue to assume the duration risk for such minimal gains.

The Bond Buyer’s weekly yield indexes were narrowly mixed, with some dipping to 43-year lows while others increased.

The unit investment trust has quietly blossomed into the dominant investing vehicle for Build America Bonds — the taxable municipal debt created under last year’s stimulus legislation.

Tax-free money market funds continued to seesaw during the week ending Aug. 30, declining $2.84 billion to $337.91 billion in total assets on the heels of nearly $600 million the previous week, according to the Money Fund Report, a service of iMoneyNet.com.

If there’s a day of reckoning on the horizon for municipal closed-end funds, the market hasn’t spotted it as investors continue to fork over a premium for the trusts.

BlackRock has raised more than $1 billion for a closed-end fund devoted to Build America Bonds, creating the largest public vehicle offering investors exposure to the new class of taxable municipal debt.

Municipal bond mutual funds reported another healthy slug of new money last week as demand for high-quality fixed income continued to drive investment flows.

Investors clamoring for new supply will be faced with slim pickings this week when long-term volume in the tax-exempt market sinks to an estimated $2.61 billion — less than half of last week’s total — as trading and underwriting begins to wind down ahead of Labor Day, according to Ipreo LLC and The Bond Buyer.

Nearly all The Bond Buyer’s yield indexes declined this week, with two reaching 43-year lows, as tax-exempt yields plunged to record lows in three sessions during the week.

Outflows slowed to $597.3 million the week ending Aug. 23 after hemorrhaging $4.99 billion the week before, according to the Money Fund Report, a service of iMoneyNet.com. Total assets declined slightly to $340.75 billion from $341.34 billion.

J.J. Kenny Drake has launched three new municipal total-return indexes intended for use as benchmarks by mutual funds, private account managers, swaps traders and exchange-traded funds.

Cash continues flooding into municipal bond mutual funds as retail investors embrace yields many once scorned as being far too low.

While the seasonal note calendar is in full swing, the dog days of summer are plaguing the long-term bond market.

The Bond Buyer's weekly yield indexes declined this week as municipal yields marched steadily downward, setting new record lows in 10-year munis on a daily basis.

When asked whether municipal bonds can continue their record-setting ways, one of the most common refrains from market participants is: "why not?"

The total assets of tax-free money market funds thinned to $341.34 billion following outflows of $4.99 billion during the week ending Aug. 16, according to the Money Fund Report, a service of iMoneyNet.com.