(Adds corporate high-yield comparison, municipal yields,
By Lisa Lambert
WASHINGTON Aug 7 Demand for U.S. municipal
bonds has remained strong throughout the summer, a key
investment season, with municipal bond funds posting $16.6
million in net inflows for the week ended Aug. 6, according to
That followed net inflows of $418.6 million and $686.2
million the previous two weeks and brought the four-week moving
average to inflows of $319.8 million, according to Lipper, a
Thomson Reuters company.
Municipal bond investors typically put coupon and principal
payments in their bonds made in the summer back into the market.
The reinvestment season, along with low supply, has helped keep
demand strong, said Anthony Valeri, fixed income and investment
strategist at LPL Financial.
Investor money has washed into municipal bond funds for 25
out of 32 weeks this year, and for the year to date there have
been $11.1 billion in net inflows. In comparison, the funds saw
a record outflow in 2013 of $64.2 billion - and only 11 weeks of
inflows over the course of the whole year.
Much of the demand is for high-yield bonds, riskier debt
that comes with rich yields. While investors have fled
lower-rated corporate debt - high-yield corporate bond funds saw
record outflows of $7.068 billion for the week - they have
hunted for yield among weaker municipal credits.
In the week ended Aug. 6, high-yield funds saw $60.3 million
net inflows, after $227.2 million inflows the previous week. So
far this year, high-yield funds have only registered three weeks
"Municipal bond outperformance has led many investors to
continue to move down the credit scale in search of yield,
causing the difference between yields on lower quality bonds and
high quality bonds to narrow," wrote Dorian Jamison, a municipal
analyst for Wells Fargo Advisors.
Yields for highly rated debt are falling on Municipal Market
Data's benchmark scale. On Aug. 6, the yield for a top-rated
10-year bond was 2.22 percent and for a top-shelf 30-year was
3.25 percent, both 13 basis points lower than a month earlier.
Meanwhile, the yield on a 10-year bond rated BAA was 3.41
percent and on a lower-rated 30-year bond was 4.36 percent,
according to MMD, a unit of Thomson Reuters.
Through the end of July, Bank of America Merrill Lynch's
master municipal index had a total return of 6.778 percent for
2014. Its high-yield index notched a total return of 7.028
percent. Both beat the total return of its corporate bond index,
Exchange-traded funds have also captured investor interest
this year. According to Lipper, the funds had $22.6 million net
inflows in the week ended Aug. 6, after $96.6 million net
inflows the previous week.
(Reporting By Lisa Lambert; Editing by Grant McCool)