Salient to Investors:

Individuals pulled $52 billion from muni-funds in the first 11 months of 2013, the most since at least 1992 when data began – outflows through year-end would extend the worst losses in the muni market since 2008.

Jamie Pagliocco at Fidelity Investments and Chris Alwine at Vanguard said higher interest rates are luring buyers, helping offset the fund sales and generating even more trading. Pagliocco said outflows have still been negative, and that will drive trading volume, and as you see some stabilization in rates, you will see even more interest.

Individuals own 70 percent of munis either directly or through mutual funds and typically hold to maturity. MSRB says a third of muni trades occur within a month of issuance when measuring by dollar amount.

Gary Pollack at Deutsche Bank said we have had a lot of credit issues in 2013, notably Detroit and Puerto Rico, and that could be causing people to increase their activity as they readjust portfolios.

The median economist expects the Fed to wait until March before tapering.

John Dillon at Morgan Stanley Wealth Mgmt said there is more comfort that there are two-way flows in the marketplace, and while there is still some rate risk ahead of us, a lot of it has been worked into the picture, so the risk of a free fall is much lower than a number of months ago.

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