NEW YORK, Nov 8 - U.S. municipal bond funds reported $866
million of net inflows in the week to Nov. 7, after $123 million
of outflows in the previous week, according to data released by
Lipper on Thursday.
Municipal bond funds, popular with retail investors, have
attracted positive weekly inflows for nearly a year barring two
periods - the week ended April 11 and last week.
"Muni funds are roaring back", said Daniel Berger senior
analyst at MMD, a unit of Thomson Reuters. Berger noted that the
re-election of President Barack Obama suggested that "taxes will
increase, boosting demand for tax-exempt assets."
Superstorm Sandy, which hit the East Coast with a dampening
impact on the market activity, has been considered as a major
factor behind last week's drop.
"While the run-up to the presidential election did add an
element of uncertainty to the municipal market, we think the
explanation for last week's outflows is fairly straightforward
and relates to the dropoff in inflows resulting from Hurricane
Sandy," Chris Mauro, director of Municipal Research at RBC
Capital Markets, said in a note published on Thursday.
The four-week moving average for the muni funds remained
positive at $507 million, said Lipper, a unit of Thomson
High-yield funds had inflows for $180 million from outflows
totaling $86.2 million in the previous week.
Flows into exchange-traded municipal bond funds were
positive for $19 million from inflows of $39 million the
"This was the number everybody was looking for," in the $3.7
trillion municipal bond market, said John Dillon, chief
municipal strategist at Morgan Stanley Wealth Management.
"It removes a lot of uncertainty now. Even if you look at
the hurricane from a credit standpoint, the impact will not be
as hard as the human toll has been," he added.
A falling trend in bond yields is also seen supporting
prices. Both the 10-year and the 30-year yields fell to fresh
all-time record lows on Thursday, with the first at 1.59 percent
and the latter at 2.69 percent on Municipal Market data's
BondDesk Group data for the week ended Nov. 7 showed
retail investors bought 1.9 bonds for each one they sold,
unchanged from the previous week. The total number of bonds
bought was 53,048 while the number of bonds sold was 27,343.
The data is based on odd-lot customer transactions.