Investors are barreling into municipal bonds, driving yields to record lows and hoping for a safe hiding place at a time when taxes are almost certain to rise.
From Nov. 7 to 12, about $500 million of new money flowed into muni bond funds, according to Lipper U.S. Fund Flows. That compares to $866 million for the entire week ended Nov. 7 and is about the same as the four-week moving average.
"The argument that's been made for at least the last six months, is that on relative value basis, it's better to buy a muni than a Treasury because it's tax-advantaged," said Peter Bianchini, managing director and senior municipal bond strategist at Mesirow Financial. "If you were to buy a triple-A-rated state versus the U.S. government, they're both fairly safe credits. With the end of the election last week, there was this new sentiment — tax rates are going up."