Investors added $216 million to municipal-bond mutual funds in the week ended Wednesday, a reversal after one of the largest outflows on record last week, according to Refinitiv Lipper US Fund Flows data.
The inflow snaps three straight weeks of outflows, including last week’s $2.9 billion exodus, the seventh-largest on record. The market has stabilized recently, with some investors seizing the opportunity to snap up bonds with higher yields.
“The market was recovering last week,” said Mikhail Foux, head of municipal strategy at Barclays Plc. He expects a higher chance of outflows next week, and said flows this month and next are likely to remain negative overall. This will be especially true as tax season nears, a typically weak time for the market as investors sell bonds to pay their bills, Foux said.
Investors continue to be skittish amid rising inflation and the prospect of Federal Reserve rate hikes next month. Benchmark 10-year bonds are yielding 1.54%, climbing about 50 basis points since the end of December, data compiled by Bloomberg show.
Investors pulled $86 million from intermediate-dated funds and $66 million from high-yield funds. Long-term funds gained $223 million.
Bloomberg Markets
By Romy Varghese
February 10, 2022, 11:53 AM PST