Strong Muni Bond Inflows Signal Resilient Demand

Another strong week of inflows for municipal bond mutual funds indicated sustained heightened demand for munis.
Funds that report their flows weekly recorded inflows of $706 million for the week ended Nov. 14. That compares to inflows of $866 million from weekly reporting funds for the week ended Nov. 7.
The conclusion to the elections last week combined with a return to more normal operations for muni underwriters following the disruptions wrought by Hurricane Sandy helped munis continue their rally.
Armed with their hardy appetite for tax-exempt paper, investors responded well to the week’s issuance, despite record-breaking low yields.
Muni bond funds had seen 28 straight weeks of inflows before Hurricane Sandy arrived and battered large sections of the Northeast two weeks ago. For perspective, muni bond funds have now seen inflows for 59 of the past 63 weeks.
Investors saw record low triple-A yields at the 10-year and 30-year sections of the curve each session this week.
Assets for all muni funds that report their flows weekly increased for an eighth straight week to $320.8 billion from $318.6 billion the week before.
The value of the holdings for weekly reporting funds rose for a fourth straight week, by $1.44 billion. The week before, they increased by $968 million.
The four-week moving average for all municipal bond mutual funds that report their flows weekly saw $529 million of inflows, up a tad from a $507 million gain the week before.
Long-term bond funds that report their flows weekly also saw robust inflows. They recorded inflows to the tune of $595 million. This represented an increase from the $544 million of outflows they reported the week before.
High-yield muni funds reported solid inflows for the week. Flows have been positive for 47 of the previous 51 weeks.
High-yield funds that report weekly saw $183 million in inflows, Lipper said. The previous week, they reported $180 million in outflows.
Assets for high-yield funds that report their flows weekly increased to $43.99 billion, up from $43.63 billion the week before.
The value of the holdings for weekly reporting high-yield funds increased by $255 million. Last week, they increased by $165 million.
The four-week moving average for all high-yield municipal bond funds that report their flows weekly was $105 million of inflows, climbing slightly from $90.5 million the week before.