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December 19, 2014

Muni Debt Fund Investors Not Letting Up

by Lipper Alpha Insight.

Muni debt mutual fund investors have been living it up this year as their funds have been on a tear, gaining 8.3% on average. But despite one of the group’s best years of performance, 2014’s net inflows are not likely to impress anyone; just $21.3 billion returned to the funds after $63.5 billion disappeared during 2013. Part of the reason flows haven’t been as strong as performance might indicate is the absolute level of yields, which is now below 3.7% on the Bond Buyer GO Index.

This past week’s net inflows came in at $519 million, almost double the year’s weekly average, and suggest investors aren’t ready to change course. If recent history is any guide, yields have a bit more room to run (they touched 3.3% in November 2012), but with global economies slowing and increasing attention being given to U.S. assets, that point might be reached in 2015 sooner than we think.

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