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Illustration: Rebecca Zisser/Axios

It's been bonds, not stocks, that have drawn major investment this year and municipal bonds have attracted particularly large and consistent inflows.

What's happening: Thought of as a slow and sleepy asset class preferred by retirees and risk-intolerant savers, muni bonds saw record inflows during the first quarter.

  • The flows were spurred by the Tax Cut and Jobs Act, a reduction in muni issuance and the Fed's U-turn on interest rate policy, analysts say.

Details: Data from Lipper shows cash has flowed to munis every single week this year, and the asset class has seen cash inflows of more than $1 billion or more in 15 of the 20 weeks this year that Lipper tracks.

  • That has brought muni bond net fund inflows to $36.8 billion, already the 3rd largest annual net inflow ever for the muni bond fund group and the highest inflows this early in a year in nearly 3 decades.

"Taxpayers are experiencing the effects of the limit on SALT deductions, which in many cases are increasing tax bills," analysts at RBC Wealth Management wrote in a note to clients last month. "We anticipate tax-bill sticker shock could stoke additional demand for tax-exempt securities."

Why it matters: The asset flows show investors are eschewing risk. While equities have seen nearly $100 billion of outflows from mutual funds and ETFs so far this year, investors have pumped close to $150 billion into bonds, EPFR data shows.

  • "[M]any institutional investors today say they see taxable municipals as an attractive late-cycle asset class," Scott Sprauer and Robert Burke, municipal portfolio managers at investment firm MacKay Shields wrote recently for Pensions & Investments.
  • "With the U.S. economic recovery now longer than all but one in history, and the global economy still fragile, many of these investors welcome the higher credit quality and more reliable ratings stability of municipals vs. other fixed-income sectors."

Yes, but: Investors also have been chasing riskier munis in an effort to increase returns, pushing $8 billion into into high-yield muni bond funds, also known as junk munis, through the first 5 months of the year. That's the highest inflows through May since at least 1992, according to Lipper's data.

Go deeper: Everybody wants U.S. bonds

Go deeper

House passes sweeping election and anti-corruption bill

Photo: Win McNamee via Getty Images

The House voted 220-210Wednesday to pass Democrats' expansive election and anti-corruption bill.

Why it matters: Expanding voting access has been a top priority for Democrats for years, but the House passage of the For the People Act (H.R. 1) comes as states across the country consider legislation to rollback voting access in the aftermath of former President Trump's loss.

Updated 6 hours ago - Politics & Policy

House passes George Floyd Justice in Policing Act

Photo: Stephen Maturen via Getty Images

The House voted 220 to 212 on Wednesday evening to pass a policing bill named for George Floyd, the Black man whose death in Minneapolis last year led to nationwide protests against police brutality and racial injustice.

Why it matters: The legislation overhauls qualified immunity for police officers, bans chokeholds at the federal level, prohibits no-knock warrants in federal drug cases and outlaws racial profiling.

8 hours ago - Politics & Policy

Senate Republicans plan to exact pain before COVID relief vote

Sen. Ron Johnson. Photo: Stefani Reynolds/Bloomberg via Getty Images

Republicans are demanding a full, 600-page bill reading — and painful, multi-hour "vote-a-rama" — as Democrats forge ahead with their plan to pass President Biden's $1.9 trillion COVID-19 relief package.

Why it matters: The procedural war is aimed at forcing Democrats to defend several parts the GOP considers unnecessary and partisan. While the process won't substantially impact the final version of the mammoth bill, it'll provide plenty of ammunition for future campaign messaging.