Yield Search
Favors Municipal Market – September 2011
Yield Search Favors Municipal Market – September
2011
After August
outflows, the municipal bond market turned bullish
once again in September with four weeks in a row of bond
fund inflows – and the last week more than doubling
the inflows of the previous week. The month also saw a
couple of true superlatives.
Biggest municipal bond fund inflow in a year
Municipals benefited from a September flight to safety
as investors abandoned stocks. Tax-exempt funds gained
$1.9 billion in September, the best monthly municipal
inflow since September 2010. Investors continued the $29.3
billion stock mutual fund outflow in August by withdrawing
roughly $4 billion more in the first three weeks of September.
Best municipal bond performance since April 2009
The municipal fund flow reversal was driven largely by
the ongoing search for better yields. 10-year tax exempt
municipals beat comparable Treasuries for five consecutive
weeks – the best performance since April 2009.
Municipal meltdown prediction failing to materialize
Another contributing factor to recent municipal bond bullishness
was more favorable media attention, as the apocalyptic
predictions of a municipal meltdown are proving to be
wildly inaccurate. Questionable math predicted hundreds
of billions in municipal
bond defaults this year and that has not occurred.
As we mentioned in our Mid-Year
Municipal Credit Update, less than $10 billion materialized
as of June 30th. Actual defaults continue to be a small
fraction of those erroneously foreseen.
Regardless of the direction of fund flows or fickle media
attention, we always encourage our clients to "know
thy bonds" through independent credit
research. Please contact
your investment specialist if you have any questions
on these latest market developments.
Ronald P. Bernardi
President and CEO
Bernardi Securities, Inc.
September 7, 2011
RELATED TOPICS:
Municipal
Default & Disclosure, Credit
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This document has been
prepared by Bernardi Securities, Inc. (BSI) for our clients
and other interested parties. Within this document, we
may express opinions about the direction of financial
markets, investment sectors, trends, and taxes. These
opinions should not be considered predictions of future
results, and are subject to change at any time. Past performance
is not indicative of future returns. Nothing in this document
represents a recommendation of any particular strategy,
security or investment product. This information is provided
for educational purposes only and was obtained from sources
considered reliable, but is not guaranteed and not necessarily
complete. BSI offerings are made by prospectus or official
statement only. Income may be subject to state and local
taxes and the federal alternative minimum tax. Additional
risks associated with investing in municipal bonds include
credit risk, interest rate risk, and reinvestment risk.
Please consult your tax professional regarding the suitability
of tax-free investing. Please consult your investment
specialist for more information.
Municipal bonds
not FDIC insured * May lose principal * Not appropriate
for all investors
