Skittish investors withdrew a stunning $3.107 billion from municipal bond mutual funds in the week ending Nov. 17 — the single worst week of outflows and the largest departure of cash in 10 years, according to weekly fund flow data from Lipper FMI.

The withdrawals followed weeks of mostly steady inflows and were sparked by municipal market volatility stemming from supply and price pressures and the uncertainty about the extension of the Build America Bond program.

The massive outflow pushed the four-week moving average to a negative $489.23 million. Funds lost $10.61 billion in ­market value during the week as a deluge of supply sparked a ­sell-off that caused 30-year benchmark yields to soar to 15-month highs.

Lack of support from the Street and uncertainty over bond prices plagued the market for most of the week until it regained some of the losses by Friday.

George Friedlander, municipal strategist at Citi, said the magnitude of the record-setting municipal bond mutual fund outflows are both concerning and startling following tepid flows for the two weeks ending Nov. 9.

“It is certainly possible that supply pressures and declining bond fund flows could enhance the pressure on the muni market once again, particularly in mid-December,” he wrote in a report.

Outflows, he noted, were particularly severe in two subcategories — long-term municipal funds, which lost $2.8 billion, or 1.22% of assets, and high-yield muni funds, which lost a massive 2.73% of assets.

The last time the market saw higher net outflows was in January 2000 when municipal bond mutual funds lost $3.19 billion, according to Lipper data.

The outflows are eye-popping compared to strong net inflows in previous weeks, even though incoming cash fell to only $42 million in the prior week, according to the data.

Two weeks ago, fund flows hit their slowest pace since early in the financial crisis. For the week ended Nov. 3, municipal funds that report their figures weekly posted a net inflow of $192,000 — the lightest weekly inflow since the end of June.

Chris Holmes, a research analyst at JPMorgan, said last week’s $3.1 billion net outflows were driven by a combination of factors, including sharply rising yields on the heels of supply pressures, the possibility that the Build America Bonds program will expire at year-end, as well as negative financial headlines and the ongoing European financial crisis “weighing in the back of people’s minds.”

“It was a perfect storm” for net outflows last week, he said.

Holmes said flows have been largely positive for the last 18 to 24 months — except for June 2010, when the funds saw the exit of a modest $232 million. “We have not seen large net outflows since 2008,” Holmes said, noting that before last week, the largest net outflows occurred in December 2008, when the municipal bond mutual funds lost $1.05 billion in the aftermath of the financial meltdown, according to JPMorgan data.

“If the BAB program is not extended, it will perpetuate more fears, and the market will stay relatively cheap because of the supply-demand dynamics in the muni market,” Holmes said. “Without the BAB program, the demand might not be there for the amount of tax-exempt supply that has to come to market next year,” especially with the recent elimination of triple-A bond insurance and the variable-rate demand market in recent years.

Holmes, meanwhile, said given that the market regained some of its losses suffered last week, he expects the substantial outflows to be short-lived. “When people get scared, people run for the exits. When they realize that the supply pressures will be around for a couple of more weeks, then that will fade,” he said.

“With yields a lot higher than they were and the risk variables staying the same or improving, we will probably see better flows next week,” Holmes said.

Net flows into taxable funds, which consist mostly of corporates and Treasuries, were sharply lower than the previous week, but managed to stay above water, while equity funds experienced $4.2 billion of outflows after two consecutive months of strong net inflows, Holmes said in a report.

Weekly net asset value and total net asset information was collected on 20,000 open-end funds valued at $11 trillion, including 1,829 municipal bond funds and 497 municipal money market funds.