Investors withdrew about $4 billion from U.S. municipal-bond mutual funds in the week ended Jan. 19, the 10th straight week of outflows and the most since Lipper US Fund Flows started compiling the data in 1992.
Outflows have totaled $20.6 billion since the week ended Nov. 17, according to data compiled by Lipper, a Denver-based research company.
Forecasts calling for municipal-bond defaults are scaring individual investors, said Justin Hoogendoorn, a managing director at BMO Capital Markets in Chicago.
“We’ve had a steady flow of negative headlines,” he said in a telephone interview. “It’s just all speculation, all based on the 'What if?' scenarios.”
Meredith Whitney, the banking analyst and chief executive officer of Meredith Whitney Advisory Group, predicted as many as 100 “significant” defaults among municipalities totaling “hundreds of billions” of dollars this year in a Dec. 19 appearance on CBS Corp.’s “60 Minutes” show.
Households hold about 37 percent of the securities in the $2.86 trillion municipal bond market, according to Federal Reserve data. Mutual funds hold about 19 percent, according to the Fed.
Rates on tax-exempts maturing in 2041 have fallen 9 basis points, or 0.09 percentage point, to 4.99 percent this week, the biggest slide since the week ended Nov. 26, according to a Bloomberg Valuation index.
U.S. states face deficits in fiscal 2012 that may exceed $140 billion, the Center on Budget and Policy Priorities said in a report today.
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