Fixed income

The past week may have been an otherwise lackluster one for the tax-exempt market, but municipal bond mutual funds saw heavy demand in the form of inflows. Funds that report their flows weekly recorded inflows of $915 million for the week ended Oct. 10.

The tax-exempt market ended Tuesday weaker, continuing a sell off that began Friday after almost three weeks of gains.

Municipal bond mutual funds saw heightened demand from investors this past week. Funds that report their flows weekly recorded solid inflows of $592 million for the week ended Sept. 26, Lipper FMI numbers show.

Foreign investment in the U.S. municipal bond market has exploded in the last 10 years.

After garnering over $1 billion that ended a nearly month-long, outflow pattern last week, tax-exempt money market funds were back in negative territory this week as they lost $449.9 million and total net assets settled at $269.80 billion for the week ended Sept. 17, according to The Money Fund Report, a service of iMoneyNet.com.

Investor demand outlasted the end-of-summer doldrums with robust inflows to municipal bond mutual funds. But the past week saw those flows to weekly reporting funds fall to more modest levels, $256 million in inflows for the week ended Sept. 19.

Total estimated inflows to long-term mutual funds were $6.12 billion for the week ended Wednesday, September 12, according to data from the Investment Company Institute.

Investors poured $26.4 billion into taxable-bond funds and another $5.6 billion into municipal-bond funds last month, according to data from Morningstar.

The threat that federal subsidy payments for Build America Bonds could be slashed under the sequestration process after administration officials assured issuers those payments were safe could permanently sour the muni market on BABs and other direct pay bonds, market participants said Monday.

The tax-exempt market finished on a busier tone than it started as the Federal Open Market Committee's announcement on Quantitative Easing 3 spurred activity.

Light supply and a perceived hesitation on investors' parts conspired to hold the municipal market to only modest outperformance against Treasuries this week.

While actions by the U.S. Federal Reserve could hold promising results, international monetary policy announcements have held less and less power this year, according to a new economic and market outlook update from Deutsche Bank Private Wealth Management.

Investors with at least $25 million in net worth are boosting their exposure to alternative investments. At the same time, these UHNW households are keeping some money in familiar territory: tax-free municipal bonds. The Spectrem Group, a Chicago-based consulting firm, reached those conclusions in recent online and mail surveys.

Pacific Investment Management Co., which manages the world's biggest bond fund, predicted the global economy will slow next year.

Tax-exempts ended Tuesday weaker, following Treasuries, as market participants said trading activity continued to remain slow this week.

The recent Berkshire Hathaway trade, sound technicals and a recent industry move to standardize contracts might increase interest in muni credit default swaps, which has suffered from apathy on the part of investors and a lack of price volatility to attract traders.

The tax-exempt market ended on a slow note after a week that was described as mostly firmer by traders.

Tax-exempt money market funds lost $1.70 billion and total net assets declined to $268.31 billion in the week ended Sept. 3 -- the second consecutive week of significant losses, according to The Money Fund Report, a service of iMoneyNet.com.

Flows into municipal bond mutual funds remained positive. Barely. Those funds that report their flows weekly saw $260 million of inflows for the week ended Sept. 5.

Pimco's Gross says investors face an "age of inflation, which typically provides a headwind, not a tailwind, to securities prices -- both stocks and bonds."