U.S. muni bond fund flows corrected to $738 mln inflows

(Adds analyst comment, details of inflows)

By Hilary Russ

July 8 (Reuters) - U.S. municipal bond funds reported $738 million of inflows for the week ended July 6, according to Lipper data on Friday that was corrected from the previous day.

Lipper had reported small net outflows on Thursday, which would have been the first time investors pulled money from muni bond funds in 40 weeks.

As reported by Reuters on Thursday, the data appeared to be distorted by the merger of two state-specific funds run by American Funds into its broader Tax-Exempt Bond Fund of America .

The closures showed up in Lipper data as huge outflows of more than $700 million and skewed the total net flows to the negative.

But there was a data entry timing error at Lipper, said Tom Roseen, head of research services at Lipper, a Thomson Reuters unit.

Lipper's data entry team correctly entered information about the American Funds' merger into a program designed to capture such events.

But they did not enter the date the funds were shuttered until July 1, even though the funds had actually closed on June 17, Roseen said.

A spokesman for American Funds declined to comment.

Given large July 1 coupon payments, the inflows were expected, but a big chunk of that money may have been put into short funds, said Chris Mauro, director of municipal bond research at RBC Capital Markets.

Long-duration muni funds also had $375 million of inflows, but that is the lightest in five weeks.

"It will be interesting to see if investors move their newly acquired short muni fund investments out the curve over the next few weeks," Mauro said.

(Reporting by Hilary Russ; Editing by James Dalgleish)