By Chip Barnett
NEW YORK, June 9 For the first time in over six
months, investors turned bullish on U.S. municipal bond funds
and poured millions of dollars back into them, according to
Lipper data issued on Thursday.
Muni bond funds saw more than $274 million of net inflows
in the week ended June 8, breaking 29 straight weeks of
redemptions, Lipper reported. The last time muni funds had
posted an inflow was in the week ended Nov. 10, 2010.
"While this is only a single data point in a volatile
series, it speaks to the realization among fund investors that
while the state and local government sector continues to face
considerable long-term fiscal headwinds, the sky is not falling
in the municipal bond market," said Robert Nelson, managing
analyst at Municipal Market Data, which is part of Thomson
Reuters. "Defaults remain low and confined to known higher-risk
sectors, and the ability to service outstanding debt for the
vast majority of issuers is still strong."
In the week ending June 1, muni funds had outflows of more
than $436 million, said Lipper, which is a Thomson Reuters
The four-week moving average, however, continued to remain
negative, remaining about $141 million in the red after a
decline of around $234 million in the previous week.
Muni funds have been popular with individual investors in
the $2.9 trillion municipal bond market. But many retail
investors late last year became skittish about shaky state and
local government finances and forecasts of a coming tidal wave
of municipal bond defaults.
Also in the week ended June 8, Lipper said that municipal
Exchange Traded Funds (ETFs) pulled in about $28 million of
cash, the fifth straight week of ETF inflows.
High-yield muni funds reported an inflow of $80.6 million
after seeing an outflow of $43.5 million in the previous week,
according to Lipper.
Chris Mier, muni market strategist at Loop Capital Markets
in Chicago, said fund investors may have been wooed by to the
market after headlines predicting doom and gloom for munis
eased and other investors came back.
"We know high-net-worth (investors) have been buying bonds
directly for some time now," he said.
On Wednesday, the Investment Company Institute said that
muni funds continued to stay in the green, pulling in $20
million in the week ended June 1, the fourth week in a row the
funds saw a cash infusion.
But from mid-November through mid-May, muni funds had net
outflows of $45 billion; in the January to April period
outflows totaled $23 billion, ICI reported.
Meanwhile, tax-free money market assets rose $2.98 billion
to $309.55 billion in the week ended June 7, according to the
Money Fund Report, published by iMoneyNet on Wednesday.
(Reporting by Chip Barnett; additional reporting by Jim
Christie, Daniel Bases, Ryan Vlastelica and Karen Pierog;
Editing by Diane Craft)