Muni funds land a year's worth of cash in four months

Muni funds land a year's worth of cash in four months
Money coming from people who saw their tax bills rise as a result of the cap on state and local tax deductions.
APR 25, 2019

It's only four months into 2019, and already mutual funds that invest in state and local-government debt have raked in more cash than they usually do in a year. Investors added $1.1 billion to such funds in the week ended April 17, the fifteenth straight weekly influx, the Investment Company Institute reported Wednesday. That bumped the total to about $30 billion since January, more than muni funds have drawn during any full year since 2012, according to an analysis of the data by CreditSights. "It is just really, really impressive," said Patrick Luby, a municipal strategist at CreditSights. "It's not unusual to see the year start out with inflows as people rebalance their portfolios. But it's been consistent. You see a dip one week, think it may start to slow down, but then boom, another billion."https://cdn-res.keymedia.com/investmentnews/uploads/assets/graphics src="/wp-content/uploads2019/04/CI119507425.PNG"

Analysts say the cash flood has been driven by individuals in high-cost states such as California and New York who saw their tax bills rise as a result of the $10,000 limit on state and local tax deductions, which was first felt when they filed their returns this year. That has enhanced interest in tax-free bonds as a way to drive down what they'll owe. The demand has helped drive municipal bonds to a 2.8% gain this year, twice the return on Treasuries, even before the tax breaks are factored in, according to Bloomberg Barclays indexes. And the yields on 10-year municipal bonds have dropped to around 76% of those on federal government debt, the lowest since at least 2001, indicating that the state and local securities have grown historically pricey in comparison. Matthew Gastall, executive director at Morgan Stanley Wealth Management, said the market is gradually accepting the possibility that the deduction cap won't be changed anytime soon, if at all. As a result, munis have "rarely traded as strongly," he wrote. (More: Higher tax bills following reform surprise clients)​

Latest News

Advisor moves: Atlas tops $1B as Wells Fargo, UBS add bank veterans
Advisor moves: Atlas tops $1B as Wells Fargo, UBS add bank veterans

Wells Fargo adds two bank-channel recruits, UBS lands a JPMorgan Chase veteran, and a multi-family office lifts Atlas past $1B

Advisor mom’s son used her password to log into clients’ accounts, sell deal with conflicts, according to Washington state
Advisor mom’s son used her password to log into clients’ accounts, sell deal with conflicts, according to Washington state

“The state comes down on you in years when you make 40% returns for clients,” said Bill Swayne, the advisor and son of Candace Swayne.

Osaic in talks with Anthropic as AI reshapes advisor workforce
Osaic in talks with Anthropic as AI reshapes advisor workforce

The Independent broker-dealer giant has had “active conversations” with the Claude maker, which is days away from its expected IPO

The retirement milestone advisors aren't tracking
The retirement milestone advisors aren't tracking

For Gen X clients entering life after work, answering the financial question isn't enough to solve the entire retirement equation.

Wealthtech firms target stock pay, pensions and heirs for advisors
Wealthtech firms target stock pay, pensions and heirs for advisors

Tools from Grantd, Income Lab and Healthspan Wealth aim to keep RIAs involved in clients’ biggest money decisions

SPONSORED Best Practices for Engaging Women Around Alternatives

Growing wealth, evolving priorities, and untapped opportunities are reshaping how women approach long-term investing.

SPONSORED Built on insurance experience to deliver on long-term promises

Knighthead Life entered the market with a competitive MYGA. A strong launch earned advisor confidence and paved the way for FIAs.