Buy side

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.

Tax-exempt money market funds continued their seesaw between inflows and outflows the week ending July 12, declining $1.89 billion to settle at $352.19 billion in total net assets, according to the Money Fund Report, a service of iMoneyNet.com.

The Bond Buyer’s weekly yield indexes mostly declined this week as the municipal market continued to edge slightly firmer throughout the period.

This year marks the 25th anniversary of The Bond Buyer 40 Municipal Bond Index, a measure of municipal bond values with an interesting and at times inglorious history.

Municipal bond mutual funds last week rebounded from a brief spell of cash leakage with the biggest influx of new money in four months.

A $1.5 billion general obligation bond sale from the Los Angeles Community College District shares the primary market spotlight this week with $900 million of BABs from Illinois, expected to price Wednesday after a two-week delay.

The Bond Buyer’s weekly yield indexes declined during this holiday-shortened week, buoyed mostly by a Wednesday rally of three to five basis points.

Build America Bonds have begun to reshape long-term taxable bond indexes that until now included little state and local government debt.

Tax-exempt money market funds recovered $3.19 billion of cash for the week ending July 5 — more than double their outflows the previous week — ending with $354.08 billion in total assets, according to the Money Fund Report, a service of iMoneyNet.com.