High-yield redemptions drive spike in muni market outflows
Summary: JR provides insights into ETF fund outflows.
US municipal bond fund outflows leapt to USD 1.76bn for the week ended 11 March, driven by high yield outflows, according to Lipper/Refinitiv data. While investment grade muni funds have enjoyed a record period of inflows, high yield funds have seen much lower volume, said JR Rieger, of Rieger Report LLC, which tracks the market. The 58 municipal bond exchange-traded funds (ETF) have so far this year seen a net cash flow of USD 3bn, Rieger said. But the year-to-date inflows for the high yield ETFs is only USD 314m, Rieger said. “I think we’re going to see more outflows in high yield,” he said. Rieger noted that the two-sided market structure of ETFs could mean that some funds found buyers and avoided having to liquidate assets to cover all the sales. Mutual funds must liquidate to cover their redemptions. “We will see how today goes,” Rieger said. “I have my seatbelt on.”
Date of publication: March 13, 2020