Despite the Puerto Rico debt restructuring concerns, municipal bond exchange traded funds could still advance as new issuance falls to a 13 year low.

Over the past month, the iShares National AMT-Free Muni Bond ETF (NYSEArca: MUB) and SPDR Nuveen Barclays Municipal Bond ETF (NYSEArca: TFI) are 0.3% higher. Year-to-date, the two ETFs have gained about 6.4%.

The municipal bond market has strengthened as demand outstripped low muni sales, Bloomberg reports. In July, new supply was 16% lower for the same period year-over-year. States and cities are expected to borrow $21 billion this month, the least amount for July since 2001.

Consequently, U.S. state and city municipal bonds are up 0.3% in July after rising each of the first six months this year, a record run to start a year.

Meanwhile, bond payments to investors will outpace issuance by $6.5 billion next month, the most for August since 2001. Consequently, the strength in the munis market may persist as muni traders reinvest.

“Supply is nowhere near enough versus the cash flows,” Tim McGregor, head of munis at Northern Trust Corp., said in the article. “August supply won’t pick up in a meaningful way.”

Muni mutual funds have attracted $844 million over the past two weeks, according to Lipper data. The muni market is rallying as new issuance slows and higher tax bills outweigh financial concerns in Puerto Rico. The municipal bond market faltered over June after the U.S. commonwealth allowed public corporations to cut their debt through negotiations. [Passive Muni ETFs Shed Puerto Rico Exposure]