Buy side

Vanguard is jumping into the municipal bond exchange-traded fund fray, proposing to launch three muni ETFs with the lowest fees in the industry.

Wells Fargo is merging nearly $2.2 billion of Evergreen Investments municipal bond mutual funds into existing Wells funds as part of the bank’s purchase of Wachovia.

Essential service bonds continue to be considered among the safest municipal market investments, faring better than general obligations bonds in the current economic environment, on the back of the rate-setting ability of issuers and investor perception that these bonds are more immune to fiscal stress, according to market sources.

A $1.75 billion sale from California’s Bay Area Toll Authority will join a $1.4 billion offering of subordinate sales-tax revenue bonds from the Puerto Rico Sales Tax Financing Corp. to dominate the primary activity this week as the market prepares for an estimated $8.21 billion in new long-term volume, according to Ipreo LLC and The Bond Buyer.

Flows into municipal bond mutual funds remain moderate by recent standards.

The sovereign debt crisis in Europe is coupling with the general malaise in financial markets to make life easier for tax-free money market funds by boosting key short-term interest rates.

The Bond Buyer’s weekly yield indexes rose this week, as tax-exempt bond prices fell for most of the period despite a mild recovery in tone over the past two sessions.

After a short-lived tide of inflows, tax-exempt money market funds lost $2.94 billion and finished with $351.84 billion for the week ending June 14, according to the Money Fund Report, a service of iMoneyNet.com.

Invesco PowerShares plans to launch its second exchange-traded fund devoted to Build America Bonds, highlighting both the proliferation of municipal ETFs and the growing importance of taxable state and local government debt.

Revenue bond issues for large transportation initiatives in three states and two sizeable note deals will be at the forefront of the primary market this week.

Household ownership of municipal bonds catapulted over the $1 trillion mark for the first time ever in the first quarter of 2010. Meanwhile, foreign investors seeking a greater footprint in the municipal market via taxable Build America Bonds held $71.9 billion in their largest-ever presence in the market, according to new Federal Reserve data released yesterday.

All of The Bond Buyer’s weekly yield indexes rose this week, as bond prices declined consistently throughout the period.

Tax-exempt funds recouped nearly half of the losses they suffered last week as $1.87 billion of inflows boosted total net assets to $354.79 billion for the week ending June 7, according to the Money Fund Report, a service of iMoneyNet.com.

Billion-dollar deals will make a comeback this week when both Los Angeles County and Cook County, Ill., test the municipal waters, hoping for strong investor demand in the midst of the spring rollover season.

The flow of cash to municipal bond mutual funds continues to strengthen.

Investors who counted on diversification to shield them from market swings learned during the financial crisis they were not as diversified as they thought.

The Bond Buyer’s weekly yield indexes were narrowly mixed this week, as municipals ambled around unchanged amid somewhat light secondary trading.

Tax-exempt money market funds shed $3.91 billion in the week ending May 31, finishing with total net assets of $352.92 billion, according to the Money Fund Report, a service of iMoneyNet.com. That was a significantly steeper decline than the previous week, in which the funds saw $156.7 million of outflows and ended with $356.83 billion.

WASHINGTON — Berkshire Hathaway Inc.’s Warren Buffett warned a panel investigating the causes of the financial crisis Wednesday that states and localities may face “terrible” financial distress in the next five to 10 years that in turn could lead some to look to the federal government for bailouts.

Municipal closed-end funds are fiddling while everyone else burns.