Public finance

Tax-exempt money market funds declined by more than double the modest and short-lived inflows they enjoyed last week as $2.75 billion poured out and total net assets dropped to $323.03 billion for the week ended Feb. 28, according to the Money Fund Report, a service of ­iMoneyNet.com.

IOWAAlburnett CityFeb 23, 2011 . . . . . . $810,000

ALABAMAOpelika Utilities BoardMar 2, 2011 . . . . . . $21,555,000

CALIFORNIANational City Community Development CommissionFeb 28, 2011 . . . . . . $39,660,000

ILLINOISRochester Community Unit School District No. 3AMar 1, 2011 . . . . . . $10,295,000

Some banks are taking a detour around the complicated and expensive process of guaranteeing a municipal government’s bonds by just buying the bonds themselves.

According to survey results released Wednesday, when RBC Capital Markets asked 100 state and local government experts at The Bond Buyer Texas Public Finance Conference last month whether they would buy municipal bonds for their own portfolios, all 100 said yes.

IOWALe Mars Community School DistrictFeb 28, 2011 . . . . . . $7,985,000

CALIFORNIAAntelope Valley Healthcare DistrictFeb 25, 2011 . . . . . . $18,725,000

ARIZONASaddle Mountain Unified School District No. 90Feb 24, 2011 . . . . . . $10,000,000

The pressure on municipal bond mutual funds is fading rapidly as a much less panicked tone in the state and local government debt market has stemmed the exodus of cash from the industry.

An already-skimpy municipal market is expected to see volume levels plummet even further this week when a paltry $1.79 billion of new issuance trickles into the primary, according to Ipreo LLC and The Bond Buyer.

ILLINOISPlainfield Community Consolidated School District No 202Feb 24, 2011 . . . . . . $11,300,000

ALABAMAAlabama Board of EducationFeb 24, 2011 . . . . . . $4,745,000

Tax-exempt money market funds rose $1.14 billion to $325.79 billion in total net assets for the week ending Feb. 21, according to the Money Fund Report, a service of iMoneyNet.com.

The recent bout of panic selling by investors in municipal bond funds reflects several factors, including headline risk due to predictions of widespread defaults, rising interest rates, the extension of the Bush-era tax cuts, and rallying equities.

ILLINOISCook County School District No. 122Feb 23, 2011 . . . . . . $2,965,000

ALASKANorth Slope BoroughFeb 23, 2011 . . . . . . $33,020,000

Two state-specific municipal bond portfolios managed by BlackRock Inc. were slated to be closed to investors effective Wednesday, a day after the firm began liquidating the funds' investments, according to a Feb. 18 addendum to the funds' prospectuses.

For all the headlines about the budget woes of state and local governments, banks see them as good clients. Most market experts say there are plenty of investment-grade municipalities to court.