(Adds comments, paragraphs 2, 4-12)
By Chip Barnett
NEW YORK, June 16 U.S. municipal bond funds
posted $172 million of net outflows in the week ended June 15,
according to Lipper data issued on Thursday.
In the previous week, muni funds had inflows of about $274
million, in a buying spree that broke 29 straight weeks of
But with the latest data, the four-week moving average
stayed negative, remaining about $157 million in the red after
a decline of around $141 million in the previous week. The
average has been negative for 31 weeks. The last time the
four-week average was positive was in the week ended Nov. 10,
Individuals dominate the $2.9 trillion municipal bond
market, but the long pattern of outflows has puzzled experts
who first attributed the outflows to fears about the shaky
state of government finances and forecasts of a coming
avalanche of municipal bond defaults and possible
Since then, however, tax revenue has rebounded for many
states, counties, cities and towns, easing fears that the
historically low default rate of under 1 percent might spike
Josh Gonze, a portfolio manager with Thornburg Investment
Management in Santa Fe, New Mexico, said: "There's plenty of
demand for bonds even if we see those negative flows from
Lipper." Gonze, who helps manage $7 billion of tax-free assets,
said investors might be opting for higher-yielding assets, such
as dividend-paying stocks, or perhaps choosing to buy municipal
bonds directly, instead of through mutual funds.
Municipal "bonds remain very expensive," he said, noting
that the yield on a 10-year top-rated tax-free bond is quite
low at around 2.65 percent.
Also in the week ended June 15, Lipper said that municipal
Exchange Traded Funds (ETFs) lost about $280,000, breaking
five straight weeks of inflows.
However, high-yield muni funds reported inflows of $38.6
million after seeing inflows of $80.6 million in the previous
week, according to Lipper. This also suggests that
higher-yielding investments are in favor.
On Wednesday, the Investment Company Institute said muni
bond funds stayed positive for the fourth week in a row as
investors put $298 million of new cash into them in the week
ended June 8.
Meanwhile, tax-free money market assets fell $1.84 billion
to $307.71 billion in the week ended June 14, according to the
Money Fund Report, published on Wednesday by iMoneyNet.
(Additional reporting by Joan Gralla, Daniel Bases, and Angela
Moon; Editing by Leslie Adler)