We are seeing very strong price action in the municipal market. As we noted earlier, the "January Effect" is a result of low amounts of new issue supply and large amounts of reinvestment cash from maturing bonds and paid coupons. In addition, for the first time in 34 weeks, municipal fund flows turned positive. The jury is still out as to whether this is a knee jerk reaction to lower treasury yields or if it is a sign that retail is no longer bearish on duration and now believe that munis offer good value....

"For the period ending 01/22/2014, combined weekly and monthly reporting municipal bond funds indicated $117mn in net inflows. This is the first period of inflows in 34 weeks, dating to 5/22/2013. Among the larger fund sub-categories, Long Term funds indicated $48mn in net investment, Intermediatefunds experienced $100mn in net inflows, andHigh Yield funds saw $185mn in net new cash this period.

Weekly reporting municipal bond funds registered $85mn in inflows this period, their second consecutive week of inflows. Among the weekly reporting fund sub-categories, Long Term funds registered $25mn in net new investment, Intermediate funds received $93mn in inflows, and High Yield funds took in $160mn in net new cash.

California specific municipal funds saw $17mn in inflows, while New York specific funds indicated $25mn in net outflows.

For the period, Tax-exempt money market funds saw $351mn in net withdrawals, while Taxable money market funds saw inflows of $12.6bn.

Taxable Fixed Income funds saw $3.1bn in inflows, and Equity funds (US & Global) indicated $3.8bn in inflows."....Source Peter Degroot at Barclays Capital