Municipal mutual funds reported $82.1 million of net inflows in the week ended Feb. 12, bouncing back from a $227.3 million outflow the week before, Lipper FMI reported Thursday.

The report marked the fourth inflow in five weeks for the tax exempt funds, and came despite some "widely covered concerns surrounding Puerto Rico's ability to secure additional funding," Lipper analyst Barry Fennell wrote in the release.

Over the past two weeks, the commonwealth was downgraded to junk by the three major rating agencies and announced plans to issue general obligation-backed bonds. About two-thirds of funds hold at least some Puerto Rico debt.

Improved relative valuations and increased tax-free yields led the steady flows so far, Fennell said in an email. "The heightened focus by funds to security selection, and concerns about the short-term valuations and prospects for both fixed income and equities, as well as persistently low yields on cash alternatives could bode well for the direction of fund flows into municipal debt funds for the balance of 2014," he said.

Flows boosted assets for all municipal funds that report flows weekly to $277.83 billion in the week ended Feb. 12, from $276.78 billion for the week ended Feb. 6, according to the Lipper data. The four-week moving average for those funds was positive, but decreased to $68.56 million, from $73.86 million the previous week.

Long-term municipal bond funds that report their flows weekly gained $93.74 million, versus outflows of $277.57 in the prior week. Assets of the funds inched up to $148.23 billion from $147.79 billion previously, while the four-week moving average for the weekly reporting long-term funds remained negative at $53.30 million, compared with $51.30 last week.

Weekly reporting high-yield municipal bond funds added $161.18 million of new cash, up from $96.06 million of inflows last week. It was the sixth consecutive week that the high-yield funds attracted positive net flows, Fennell noted. Assets grew to $374.01 billion, up from $371.75 billion the week prior, while the four-week moving average remained positive at $179.64 million, albeit down from $208.43 million previously.

Christine Albano is a buy side reporter for The Bond Buyer.  

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