Buy side

Special assessment and tax-increment financing bonds from regions prone to property bubbles and busts are most vulnerable to the continuing weakness of the commercial real estate market, according to a Fitch Ratings report released Tuesday.

While Build America Bonds have limited the supply of tax-exempt issuance, strong demand from retail investors is also playing a vital role in lowering issuers’ borrowing costs to historic lows.

Market gains and new money from investors continued to push municipal bond mutual funds’ assets to records last week.

Minnesota will lead a modest slate of new state and local government debt issuance this week as it comes to market with a competitive $865 million general obligation deal.

Tax-free money market funds suffered a big exodus of cash last week as investors continue to grow disgruntled with paltry yields.

Nuveen Investments announced plans Thursday to purchase First American Funds’ long-term asset business as part of a strategy to offer a more diverse suite of products to investors.

Money market funds are taking advantage of higher short-term interest rates the past few months to reclaim some of the management fees they have been waiving to avoid negative yields.

Nearly all The Bond Buyer’s weekly yield indexes declined this week, finishing off a mostly-firmer period with hints of ­weakness.

Buoyed by the strength of the long-term municipal market over the past 18 months, mutual fund assets have climbed to record levels, and portfolio managers have had little need to make major changes to their current investment strategies.

After scrambling to sew up $84 billion in budget holes for the new fiscal year, states already face as much as $149 billion in new shortfalls during the next three, according to a report Tuesday from the National Conference of State Legislatures.

Municipal bond mutual funds attracted another influx of new money last week as the pace of flows into the industry continued to stabilize.

The few sizable deals in the primary market this week — anchored by a $1.5 billion Texas Transportation Commission highway revenue financing — are expected to draw keen attention amid a summer supply shortage, according to underwriters and traders.

The Bond Buyer’s weekly yield indexes mostly declined this week, as a firmness permeated the market through each session.

Even as Build America Bonds continue to transform municipal finance, one thing stays constant: hedging a portfolio of muni securities remains very difficult.

Tax-exempt money market funds experienced outflows of $3.25 billion in the week ending July 19, nearly double the losses recorded the previous week, according to the Money Fund Report, a service of iMoneyNet.com.

George Friedlander has rejoined Citigroup as head of municipal strategy.

Two new Standard & Poor’s indexes tracking municipal bonds launched yesterday, paving the way for Vanguard to enter the municipal exchange-traded fund business.

Municipal bond mutual funds’ assets climbed to a new record total as they continue to command new money from investors in spite of low yields and a nonstop wave of bad headlines in the mainstream press over state and local government credit.

Volume is expected to increase slightly this week thanks to the arrival of several significantly sized financings in the long-term market. They include a large Florida airport deal, a pair of California utility offerings, and a trio of Northeast deals hailing from issuers in New York, Pennsylvania, and the District of Columbia.

The growing investor acceptance of taxable municipal bonds over the past year appears to have hit a stumbling block.