Muni Bonds Yields Drop Despite Heavy Issuances, Doubled Outflows

Muni bonds ought to have had a rough week, with outflows more than doubling from $875 million to $1.9 billion and more than $11 billion in new issuing, but a Volcker Rule exception and a few other positive trends actually caused them to recover.

Doubling of Muni bonds fund outflows

“Despite a combination of factors that might have been expected to generate significant distress, which include the heaviest new issue supply of the year, a week-over-week doubling of bond fund outflows, and some signs of tax loss selling, the market ended the week with slightly lower yields than it began,” write Citi analysts George Friedlander, Mikhail Foux, and Vikram Rai.

These outflows continue a six-month trend of declining assets even...