July 26, 2019

Fund Investors Warm to Municipal Bond Funds

by Tom Roseen.

For the Lipper fund-flows week ended July 24, 2019, investors injected a net $2.0 billion into municipal bond funds, their strongest weekly net inflows on record going back to 1992, when Lipper began calculating weekly estimated net flows. This week was the twenty-ninth consecutive week that municipal bond funds (including ETFs) witnessed net inflows. It is the longest period of uninterrupted weekly flows going back to the 54-week period ended October 12, 2015. Year to date, muni bond funds have taken in $52.8 billion, their largest draw of net new money since 2009, when investors injected $81.1 billion for the full year.


While equity markets appear to be cheering the U.S. Federal Reserve Board’s recent dovish stance and anticipated interest rate cut at the July Federal Open Market Committee meeting, flows into equity funds have slowed. For the most recent fund-flows week, equity funds experienced net outflows of $8.4 billion despite the average equity fund posting a 1.15% return for the week. And this week, we saw net outflows from both conventional equity funds (-$5.7 billion) and equity ETFs (-$2.7 billion). Year to date, equity funds have witnessed net outflows of $76.3 billion despite the average equity fund sporting a year-to-date return of 19.05%.

As one might expect, given the Fed’s dovish stance, investors also padded the coffers of taxable bond funds, injecting slightly less than $4.0 billion for the week. Corporate investment-grade debt funds were the primary attractor of investors’ assets, drawing $2.5 billion, followed by corporate high-yield funds (+$1.3 billion) and government-mortgage funds (+$485 million). Year to date, taxable bond funds have taken in a net $161.6 billion, while money market funds have attracted $217.8 billion.

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