Tags: FT | Poll | Prospects | Grim | Muni | Bond | revival

FT: Prospects Look Grim for Muni-Bond Revival

Thursday, 28 Apr 2011 08:23 AM

Investor appetite for mutual funds that buy U.S. municipal bonds won't be rushing back this year, according to a survey of experts.

Only 7 percent of 92 municipal bankers, lawyers and issuers polled by RBC Capital Markets predict a return to net inflows into such funds this year, The Financial Times reported.

Year-to-date outflows in such bonds has hit $30 billion on fears that U.S. states, cities and municipalities may default on their municipal bonds.

"Over the near term, at least, we don’t see a substantial reversal in the fund flows," says Chris Mauro, director of municipal bond research at RBC Capital Markets, the newspaper reports.

Individual investors make about two-thirds of the $3 trillion market by buying municipal bonds directly or through mutual funds.

Many bolted when star Wall Street analyst Meredith Whitney appeared on "60 Minutes" last December warning that defaults on municipal bonds could skyrocket.

MeredithWhitney200gty.jpg
Meredith Whitney
(AP photo)
While prices may have recovered a bit since then, demand hasn't.

"Although prices for municipal bonds have crept up over the past couple of months, the volume of trading on the secondary market has been generally weak," says Patrick Fisher, an investment adviser with Schneider Downs Wealth Management Advisors, tells the Pittsburgh Post-Gazette.

Some say, however, that now is a good time to get in.

"There is a lot of anxiety and fear in the municipal bond market due to investors questioning the true merits of the bond," says Mike Saghy, director of investments at PNC Financial Services, according to the Pittsburgh Post-Gazette.

"We actually think the municipal bond market is very attractive at the moment if you do your muni bond due diligence."

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Investor appetite for mutual funds that buy U.S. municipal bonds won't be rushing back this year, according to a survey of experts. Only 7 percent of 92 municipal bankers, lawyers and issuers polled by RBC Capital Markets predict a return to net inflows into such funds...
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2011-23-28
 

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