By Lisa Lambert
WASHINGTON Aug 29 U.S. municipal bond funds
reported net outflows $1.74 billion in the week ended Aug. 28,
lower than the $2.14 billion of outflows in the previous week,
according to data released by Lipper on Thursday.
It was the 14th week in a row of outflows, which kept the
four-week moving average negative at $1.52 billion, said Lipper,
a unit of Thomson Reuters.
Fears of interest rate hikes and nervousness about credit
risk have led to a mass exodus from municipal bond funds, with
outflows reaching a record high of $4.53 billion at the end of
June. Detroit, which filed for the largest U.S. municipal
bankruptcy in July, added to investors' concerns.
Investors pulled $335.79 million out of high-yield funds,
compared with $460.03 million the week before. Exchange-traded
funds had net outflows of $24.79 million, after outflows of
$114.85 million the previous week.
During the same week in August last year, municipal bond
funds reported $602.32 million of net inflows, according to
In 2013 so far there have only been 11 weeks of inflows, and
the string of consecutive outflows, when combined with credit
issues, "have resulted in yields that are significantly cheaper
than their corporate bond counterparts," according to S&P Dow
Jones Indices. The S&P National AMT-Free Municipal Bond Index,
made up of investment-grade municipal bonds, is down 1.68
percent for August and down 5.55 percent for the year to date.
Long-term debt has felt the most strain.
The Vanguard Group's short-term tax-exempt bond fund has
posted a year-to-date return of 0.01 percent. In comparison, its
long-term tax-exempt fund's return for the year to Aug. 28 is a
negative 5.79 percent.
Similarly, PIMCO's fund of investment-grade municipal bonds
has had a year-to-date return of a minus 6.99 percent, while
its fund focused exclusively on short-term municipal debt has
fared better, with a year-to-date return of negative 0.13
On Thursday, top-rated 10-year bonds on Municipal Market
Data's benchmark scale yielded 2.94 percent, and highly rated
30-years yielded 4.45 percent. A year ago, yields were much
lower, and prices, which move inversely to yields, higher.
Yields on 10-year bonds were 1.75 percent and on 30-year bonds
2.90 percent, according to MMD, a Thomson Reuters company.
Nonetheless, retail interest in buying individual bonds has
remained strong. According to BondDesk Group LLC, investors
bought five bonds for every two they sold in the week ended Aug.
28, the same as the week before.