Muni bond fund redemptions jump again

Withdrawals from mutual funds that invest in municipal bonds accelerated last week as prices of the securities fell further.

Investors cashed out a net $4.85 billion from muni funds in the seven days that ended Dec. 15, up from $1.26 billion the week before and the biggest sum pulled out since munis hit the skids in early November, the Investment Company Institute said Wednesday.

Investors now have withdrawn a net $14.2 billion from muni funds since Nov. 3, or about 2.8% of assets.

Prices of bonds in general have been falling, and their yields have been surging, for several weeks. But munis have been hit especially hard: The average yield on the Bond Buyer index of 40 long-term muni bonds rose to 5.73% last week from 4.86% in mid-October.

The higher yields have since attracted buyers. The Bond Buyer index was at 5.5% on Wednesday.

Investors in taxable bond funds cashed out a net $3.77 billion in the latest period, the second straight week of redemptions. The last time taxable funds as a group had net redemptions was in late 2008 during the financial-system meltdown.

But the cash pulled from taxable bond funds in the last two weeks has amounted to less than 0.2% of assets.

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