By John Bagley
It looked and felt to screen watchers late last month like the sequel to Man of Steel had arrived prematurely. This time, though, General Zod seemed to set his sights on the bond market, recruiting an army of bond fund managers to annihilate everything from 1-year Treasuries to 30-year corporate and municipal bonds. Over the three trading days following the June Fed meeting, yields on benchmark municipal bonds increased by 60 basis points, the largest move over a 3-day period in more than 25 years.
Behind the move was relentless selling by bond funds, which experienced record outflows during June of more than $60 billion. The selloff reached a peak on the morning of Tuesday, June 25, and then, with 3.5% 10-Year and 5% 30-year muni bonds trading at or below par for the first time in several years, miraculously, the market reversed. A furious rally ensued, taking yields back down almost half a percentage point.
Had fund managers gone mad and immediately bought back all theRead More »from How Retail Investors Saved the Muni Market