Municipal bond investors, spooked that interest rates climb from record lows is accelerating, continue to pull money from the market in record-breaking droves.
Those muni bond funds that report flows weekly suffered outflows of $2.22 billion for the week of June 19, Lipper FMI numbers showed, a new record for the year. The previous week, muni bond funds reported $1.61 billion in outflows.
The market held its ground until Wednesday, when munis began a selloff that shifted into overdrive on Thursday and continued on Friday. They were reacting to Federal Reserve chairman Ben Bernankes comments after the Federal Open Market Committee meeting that hinted the Fed may start tapering its $85 billion-a-month bond purchasing program by the end of the year.
Issuers on Thursday pulled some of the weeks bigger deals, including the largest: a $763 million sale by the California Health Facilities Authority for the Saint Joseph Health System. New Yorks Metropolitan Transportation Authority postponed a $350 million deal, and the City of Hope, Calif., shelved a $250 million notes issue.
The city of Philadelphia announced it is moving back a $400 million general obligation sale that had been planned for next week.
In the secondary, heavy selling took hold Thursday. Traders spoke of redemption selling at the large investment firms early in the day.
We did see selling yesterday; were continuing to see it today, said Ashton Goodfield, managing director and portfolio manager at DWS Investments, Deutsche Investment Management Americas Inc. A lot of it has to do with large outflows from mutual funds.
On the week from last Monday, 10-year triple-A, tax-exempt yields rocketed 40 basis points to 2.63%. Those at the 30-year section of the curve vaulted 46 basis points over the period to 3.96%. The two-year rose 12 basis points to 0.43%.
Yields at the 10-year and 30-year parts of the curve havent been this high since July and August 2011, when they reached 2.67% and 4.05%, respectively. Muni ratios to Treasuries climbed well past 100% across the curve.
Assets for all muni funds that report their flows weekly plunged by almost $3.0 billion, after falling by more than $5.0 billion the preceding week to $315 billion. The previous week they reported almost $319 billion.
The value of the holdings for weekly reporting funds dove $1.20 billion. The week before, they had tumbled $3.45 billion.
The four-week moving average for all municipal bond mutual funds that report their flows weekly was $1.36 billion of outflows, compared to $793 million of outflows the week before.
Money continued to hemorrhage from long-term bond funds that report their flows weekly. As with all funds, its the third straight week of outflows of more than $1 billion.
The flight continued for a 16th straight week, increasing to $1.74 billion. Long-term bond funds reported $1.54 billion of outflows the previous week.
High-yield muni funds told a similar story.
Those high-yield funds that report flows weekly recorded $850 million in outflows, according to Lipper. The previous week, they reported $657 million in outflows.
Assets for high-yield funds that report their flows weekly fell to $42.40 billion, from the $43.61 billion reported the week before.
The value of the holdings for high-yield funds dropped by $327 million. Last week, they fell by $734 million.
The four-week moving average for all high-yield municipal bond funds that report their flows weekly showed $544 million of outflows, from $362 million of outflows the week before.