WASHINGTON Aug 1 U.S. municipal bond funds reported $2.24 billion of net outflows in the week ended July 31, nearly twice the previous week's $1.23 billion, according to data released by Lipper on Thursday.
The four-week moving average was negative at $1.56 billion in outflows, said Lipper, a unit of Thomson Reuters.
Apprehension about municipal bonds helped fuel the 10th week of outflows, said Tom Roseen, head of research services at Lipper. When Detroit filed for the largest municipal bankruptcy in U.S. history, investors began to wonder if there were other "possible culprits" in the market who could default and pulled money out.
Investors in the municipal bond market also remain worried the Federal Reserve could end its monetary stimulus program and create interest rate risk for fixed income, Roseen said, noting that funds for taxable debt also experienced outflows this week.
"Until people realize they can get better yield than on Treasuries, we will continue to see outflows," Roseen said about municipal bond funds.
On Thursday, yields on top-rated 10-years were 2.71 percent on Municipal Market Data's benchmark scale and highly rated 30-year bonds 4.22 percent.
Ten-year yields were 99.6 percent of comparable Treasuries and 30-years were 111.9 percent, according to MMD, a Thomson Reuters company. Because Treasuries are taxed, they typically have higher yields than tax-exempt municipal bonds and the ratios showed top-shelf municipal bonds are currently cheaper than Treasuries.
Funds that hold high-yield municipal bonds, which usually have lower ratings, saw outflows of $580.18 million in the week after $231.71 million in outflows last week, Lipper said.
There were $56.86 million in outflows from exchange-traded funds, as well, compared with the $10.02 million investors pulled out of the funds the previous week.
Still, when it came to individual bonds, there was still appetite, data from BondDesk Group LLC showed. Retail investors bought 2.2 municipal bonds for every one they sold in the week ended July 31, the same as the week before. The number of bonds bought totaled 84,761, while the number of bonds sold was 38,923.