UPDATE 1-High-yield drives $273.8 mln U.S. muni fund inflows -Lipper

WASHINGTON, April 10 Thu Apr 10, 2014 5:22pm EDT

WASHINGTON, April 10 (Reuters) - U.S. municipal bond funds reported $273.8 million of net inflows in the week ended April 9, a sharp reversal from the $81.3 million in outflows the previous week, according to data released by Lipper on Thursday that showed investor appetite for debt with high yields continues to grow.

High-yield municipal bond funds alone reported much higher net inflows of $323.5 million, marking the largest week in 2014 for money flowing into funds typically containing lower-rated debt.

For 14 straight weeks money has washed into high-yield funds, with last week registering $186.2 million of inflows. But this week's inflows were the largest since the week ended Sept. 25, according to Lipper, a unit of Thomson Reuters.

For all municipal bond funds, the four-week moving average remained positive at $21.9 million, said Lipper.

Concerns about the financial shape of Puerto Rico and Detroit last year, along with the possibility of rising interest rates, prompted investors to flee municipal bond funds in record amounts. Buyers, though, now appear to be dipping their toes back into the water as bankrupt Detroit and junk-rated Puerto Rico edge closer to resolving some of their problems.

The total return for BBB-rated munis was 6.5 percent for the period spanning Dec. 31, 2013, through the end of March, according to Bank of America Merrill Lynch. In comparison, municipal bonds with top AAA ratings only had total returns of 2.43 percent over that timeframe. (Reporting by Lisa Lambert; Editing by Lisa Shumaker)

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