Investors yank heaps of cash from bond funds, AMG data show.

Net redemptions from municipal bond funds totaled $930 million in the latest reporting week, making it the biggest week for outflows since April, AMG Data Services figures show. The tally for the week ended Oct. 26 helped bring to $4 billion the amount of investor cash that has left the funds since mid-September, according to AMG Data president Robert Adler. "Mid-September was when the string of out-flows began," he said, adding that the $4 billion of redemptions represents "the largest net redemptions [for a seven-week] period since we began tracking the information in 1990." The redemptions took placed from the week ended Sept. 14 through the week ended Oct. 26, Adler said.

AMG now tracks data from 1,617 municipal funds.

Despite AMG's data, Reid Smith, an assistant vice president at the Vanguard Group of Investment Companies, said his funds have not experienced dramatic outflows.

"We have not seen that kind of negative cash flow at all," Smith said.

While redemptions have picked up slightly in the past week or so, Smith said they were nowhere near the level Vanguard's funds experienced in April. The market's April drop was linked to both the Federal Reserves tightening of monetary policy and to deleveraging by funds that owned inverse floaters, Smith said.

Smith said he can't explain for certain why Vanguard's experience differs from AMG's data.

"Maybe [it's] just the type of shareholders that we've garnered over the years, and the educational process that we've undertaken," he said.

Smith said Vanguard scrutinizes its shareholders carefully, and those that abuse the fund's redemption privileges are eliminated. Those with "a hot hand" or high transaction levels are not allowed to participate, he said.

"It's just detrimental to existing shareholders," he said.

In the secondary market Friday, municipal bond prices ended largely flat despite a full-point gain in the government's 30-year bond. Both dollar bonds and high-grade issues ended unchanged in light activity, a municipal analyst said.

The 30-year Treasury bond closed up a point to yield 7.95%, follow the GDP report, which showed the economy expanding at a 3.4% rate in the third quarter.

While the increase was bigger than expected, market participants took heart that the report also included encouraging inflation data. The Treasury market was also helped by short covering and a stronger dollar.

In debt futures, the December municipal contract closed up nearly ?, to settle at 85??. Friday's December MOB spread was negative 413, compared with negative 401 on Thursday.

Michael J. Moran, chief economist a Daiwa Securities Inc., said Friday's gains in the government market appeared to be mainly related to the dollar. Moran cited rumors Friday of an emergency G-7 meeting to discuss strategies to shore up the U.S. currency.

"It rose noticeably against the German mark, moving above 1.50," he said. "And I think this movement with the dollar is feeding back on the bond market."

Looking to this week, Moran said tomorrow's National Association of Purchasing Management's report and Thursday's single-family home sales data should grab players' attention. This week's main event, however, is Friday's October employment report, which Moran believes will show a gain of 260,000 nonfarm jobs.

Moran added, though, that his number is probably above the consensus forecast.

Moran said the NAPM report should be interesting, given that the index reached a new peak for the year in September. Continued strength there could spell trouble for the bond market, but Moran said he expects the index will edge slightly lower, and back into the narrow range seen for most of this year. Consequently, it should have little implication for the bond market.

As for home sales, "most of the indicators we have seen on housing recently have been strong," Moran said, adding that last month's reading on new home sales was no exception. If Thursday's home sales number is strong, it suggests higher interest rates are not constraining sales, he said.

He sees new home sales totaling 690,000, which is down slightly from September's figure.

Meanwhile, the 30-day visible supply of municipal bonds Friday totaled $2.603 billion, down $170.2 million from Thursday. That comprises $1.312 billion of competitive bonds, down $208.6 million from Thursday, and $1.292 billion of negotiated bonds, up $28.4 million from Thursday.

Standard & Poor's Corp.'s Blue List of municipal bonds was up $75.6 million yesterday, to $2.241 billion.

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