March 28 (Reuters) - U.S. municipal bond funds reported net weekly outflows of $43 million in the week ended March 27, compared with outflows of $261 million the previous week, Lipper said on Thursday.
After four consecutive weeks of outflows, the four-week moving average was for a net outflow of $128.4 million. A week earlier, the four-week moving average was knocked from a net inflow to a net outflow of $36.6 million.
For two months, investor money poured into municipal bond funds on a net basis before reversing in March, according to Lipper, a Thomson Reuters company.
High-yield funds did not follow suit in the most recent week, registering weekly inflows of $16.8 million, compared to outflows last week of $36.9 million. The four-week moving average for high-yield muni funds remained negative, with Lipper reporting average weekly outflows over the period at $26.2 million.
Exchange-traded funds showed outflows of $5 million in the latest week, a continued decline from the previous week’s $21 million of net outflows.
Recent outflows have been driven by long-bond funds, said Chris Mauro, head of municipals strategy at RBC Capital Markets, in a research note on Thursday.
Normal seasonal selling at tax time can’t account for all of the weakness in muni fund flows, he said.
“These outflows are coming too early in the year to be entirely attributable to tax season,” he said.
An examination of the last 10 years of fund flow data showed that such outflows usually materialize in the second and third weeks of April, not in early March, he said.
“A strong equity market, continued low muni yields, and a fear of rising interest rates have combined to diminish the attractiveness of the municipal asset class to some degree,” he said.
On Wall Street, the benchmark S&P 500 set a record closing high on Thursday, finishing a fifth consecutive month of gains.
Retail investors held steady munis, buying 1.8 muni bonds for every one they sold in the week ended March 27. That is up slightly from the 1.7 ratio that held for at least the four previous weeks, according to BondDesk Group.
The number of bonds bought totaled 60,582, while the number of bonds sold was 34,608.