UPDATE 2-U.S. muni bond funds post $13 mln weekly outflows

Thu Jan 3, 2013 5:39pm EST

Jan 3 (Reuters) - U.S. municipal bond funds reported $13 million of net outflows in the week ended Jan. 2, down from $423 million of net outflows in the previous week, according to data released by Lipper on Thursday.

This marked the third week in a row that the funds registered outflows. For all of 2012, there were only four weeks of net outflows, with the biggest, at $2.31 billion, in the week ended Dec. 19.

The four-week moving average remained negative at $610 million, said Lipper, a unit of Thomson Reuters.

High-yield funds reported outflows of $104 million, following a net outflow of $261 million the previous week.

Flows out of exchange-traded municipal bond funds totaled $7.3 million, compared with outflows of $1.9 million in the last week of December.

Rick Ashburn, chief investment officer at Creekside Partners in Lafayette, California, said recent outflows were due to investors generally locking in capital gains, selling muni assets to gift proceeds in estate-tax planning moves and jumping out of muni debt over fears that its tax-exemption would be changed in fiscal cliff talks.

"Two weeks ago we were very nervous that munis were going to become taxable to one degree or another," Ashburn said. "Now, as I'm sitting here today, nobody is worried about munis."

But Ashburn expects investor anxiety about munis to return as talks in Washington over federal fiscal matters resume. "They'll be worried again in six weeks," he said. "Everything goes back on the table, including those things that weren't addressed over the weekend."

Separately, BondDesk Group data for the week ended Jan. 2 showed retail investors bought 1.9 bonds for each one they sold, up from 1.5 the previous week. The total number of bonds bought was 39,682, while the number of bonds sold was 20,501.

The data is based on odd-lot customer transactions.