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Municipal bond funds had their first weekly inflow since Meredith Whitney’s infamous December appearance on “60 Minutes,” where the analyst predicted that up to 100 muni bond defaults would cost investors in this traditionally conservative marketplace billions.
Investors put $246 million into tax-exempt bond funds during the week ended June 8th, breaking a 29-week outflow streak that totaled a whopping $49 billion, according to data from Lipper, a Thomson Reuters unit. Assets in municipal bond funds, excluding ETFs, were $468 billion at the end of May compared to $520.7 billion at the end of October last year.
“While one week hardly makes for a trend, it’s worth nothing that muni funds have been outperforming the broad market year-to-date,” said Daniel Fannon, an analyst for Jefferies, in a note.
The asset class may be regaining its status as a stable, income-generating group after the Dow Jones Industrial Average fell back below 12,000 this week and as state and municipal tax revenues seem to be coming in better than feared.
“Local governments are actually in better shape because of higher tax income and lower costs this year,” said Stephen Weiss of Short Hills Capital. “Muni professionals view her analysis with significant skepticism.”
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