U.S. municipal bond funds had some of the biggest outflows since January, after investors pulled out $790M in the week ended July 9. $691M of the outflows was in the high-yield sector, being withdrawn due to default concerns of Puerto Rican debt.
Adding to the worries is Puerto Rico's newest law which allows for public corporations to restructure their debt. The new law pushed ratings agencies last week to downgrade the commonwealth's bonds even lower within junk territory.
Barclays High Yield Municipal Bond Index, up more than 9.5% in mid-June, was up less than 5.5% this past Wednesday.