Monday Muni Catchup

by PL

IMG_5209This week’s Muni Catchup:

  • Context
  • Muni Bond Fund Flows
  • Recap
  • Looking Ahead


An article in the Financial Times (May 12, “U.S. Muni Bonds Unlikely Home for the Huddled Masses,” not linked since it is behind their pay wall) pointed out that an increasing number of non-U.S. investors are buying munis. Why wouldn’t they? Even with the lower yield because of the U.S. Federal tax exemption, muni yields are higher than what is available on many other high quality bonds around the world. When you factor in the lower default risk of munis versus corporates, it is actually surprising that more non-U.S. investors haven’t been bigger buyers of munis. Muni ETFs would be a particularly easy way to access munis. There are even two muni ETFs that specialize in taxable Build America Bonds. Click here to read about how to select a muni ETF.

Muni Bond Fund Flows

For all the headlines about the low-rate environment and objections to putting money into bonds (at least among commentators), investors have in fact been moving money into muni open-end funds and ETFs in a big way. It is interesting to note that after last year, when ETFs claimed a significantly larger percentage of the total flows, this year the proportion has dropped back down to be in line with 2014.

Total Flows Mutual Funds Mutual Fund / Total ETFs ETFs / Total


$31,156 $27,988 90% $3,168 10%






2016 YTD






2016 Annualized*

$67,060 $61,161 91% $5,899


Source: Investment Company Institute weekly statistics release, May 11, 2016. Data as of May 4, 2016. Downloaded from 
*Not seasonally adjusted.


Heres a recap of what I published last week:

Looking Ahead

  • Due to the Memorial Day Holiday, SIFMA recommends that U.S. bond markets close at 2:00 ET on Friday, May 27, with a full close (of course) on Monday, May 30.
  • Wednesday, June 1 will be the official kick-off of Summer Redemption Season. Of the $38 billion in redemptions expected for June, about 80% will be in the top 16 states (in billions):
    • NJ   $6.6
    • NY  $5.7
    • CA  $5.6
    • FL  $1.8
    • CO  $1.6
    • PA  $1.4
    • OR  $1.3
    • OH  $1.0

Rounding out the rest of the top 16 with less than $1 billion each will be MA, NC, IL, WA, TX, LA, VA and CT.

It will be very interesting to watch to see how much of the maturing bond proceeds get re-directed into muni bond funds or muni ETFs instead of direct purchases of individual bonds.

Have a great week,


The opinions expressed and the information contained herein are based on sources believed to be reliable, but accuracy or appropriateness is not guaranteed. Past performance is interesting but is not a guarantee of future results. The author does not provide investment, tax, legal or accounting advice–this is NOT investment advice. Investors should consult with their own advisor and fully understand their own situation when considering changes to their strategy, tactics or individual investments. Investments in bonds are subject to gains/losses based on the level of interest rates, market conditions and credit quality of the issuer. Additional information available upon request.