Investors have poured the most cash since 2010 into the riskiest municipal debt, prompting Invesco to close its high-yield fund to new buyers.

High-yield muni funds added about $1.1 billion in the five weeks through Aug. 8, the most since December 2010, Lipper US Fund Flows data show.

They have attracted about $5.4 billion in 2012, compared with $31.7 billion in outflows over the same period last year.

"We've been getting tremendous fund flows into the space, and supply in high-yield has just not been very strong," said Bill Black, co-manager of the $6.8 billion Invesco Van Kampen High Yield Municipal Fund, which Invesco is closing to new investors.

State and local government debt is benefiting from Federal Reserve Chairman Ben Bernanke's policy of keeping the central bank's key lending rate near zero through at least 2014, boosting demand for higher-yielding assets over Treasurys, whose interest rates are near record lows.

Investors have accepted lower credit quality in search of higher yields, helping local governments recover from the worst recession since the 1930s.