Investors pour cash into muni bonds as yields rise and the summer reinvestment season approaches. municipal-bond funds attracted $2.3 billion in the week ended May 27, the second‑largest weekly inflow since 1992, according to a JPMorgan report. The surge reflects investors' search for tax‑exempt yields amid a flattening Treasury curve, helping keep municipal borrowing costs low.

Higher yields have narrowed the spread between municipal and Treasury securities, making the tax‑free market more attractive to both retail and institutional buyers. With the July 1 reinvestment deadline looming, many investors are reallocating cash that matured in the spring, boosting demand for new issuances across states and utilities. The heightened activity also benefits fund managers who can deploy cash without resorting to lower‑yielding Treasury alternatives.

The inflow lifts fund assets to roughly $600 billion, sharpening competition for limited new issues and pressuring issuers to offer higher coupons. Analysts warn that if yields dip before the summer window closes, inflows could retreat, leaving funds with excess cash and potentially widening spreads again. State treasurers watch demand, hoping appetite lets them refinance older debt.