Cash Flight Persists as Municipal Funds Lose $2.73B

The Bond Buyer reports:

Investors continued to ferry cash out of their municipal bond mutual funds at historic rates last week as a tumultuous sell-off sowed fear among buyers.

Mutual funds that report their figures weekly posted a net outflow of $2.73 billion for the week ended Dec. 15, according to Lipper FMI. It was the fifth-consecutive weekly outflow for municipal funds.

Redemptions from municipal funds lately have forced portfolio managers to sell bonds to raise cash, contributing to the drubbing for municipals, which has pushed the yield on a benchmark triple-A 10-year muni bond up 63 basis points since Nov. 10 — when the drain began.

The four-week moving average for the period ended Dec. 15 for all municipal funds, including those that report their figures monthly, was a nearly unprecedented loss of $2.3 billion. That’s the second-highest tally ever recorded. The record was set by the four-week period that ended Dec. 8.

You'll want to watch last night's 60 Minutes piece on the subject of debt concerning state and local governments.