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Indexes: 40-Year Lows

Two of The Bond Buyer’s weekly yield indexes declined to 40-year lows this week as yields dropped slightly in all the week’s sessions.

Michael Pietronico, chief executive officer at Miller Tabak Asset Management, said this week was “more of the same” of what the municipal market has been experiencing of late.

“Yields are being pressured lower by the lack of supply, and the obvious unattractiveness of basically a 0% cash-equivalent yield,” he said. “There’s no let-up in the contraction of yields; however, there seems to be a reasonable amount of hesitation moving into the market. People are forced to put money to work.”

The Bond Buyer 20-bond index of 20-year general obligation bond yields dropped 10 basis points this week to 3.94%. This is the lowest level for the index since Aug. 10, 1967, when it was also 3.94%. The index now has declined or remained unchanged for 10 consecutive weeks, declining a total of 75 basis points from its most recent high of 4.69% on July 23.

The 11-bond index of higher-grade 20-year GO yields also dropped 10 basis points, to 3.69%. This is the lowest the index has been since April 27, 1967, when it was 3.61%. The index has dropped or been unchanged every week for the past nine weeks, falling a cumulative 72 basis points from its most recent high of 4.41% on July 30.

The revenue bond index, which measures 30-year revenue bond yields, declined 17 basis points this week to 4.69%. This is the lowest level for the index since Jan. 17, 2008, when it was 4.63%. The index has now declined eight weeks in a row, for a total loss of 99 basis points from its most recent high of 5.68% on Aug. 6.

The 10-year Treasury note yield declined 18 basis points this week to 3.20%, which is the lowest it has been since May 14, when it was 3.11%. The 30-year Treasury bond fell 20 basis points this week to 3.97%, which is the lowest it has been since April 23, when it was 3.80%.

The Bond Buyer one-year note index, which is based on one-year tax-exempt note yields, was unchanged at its all-time low of 0.56%. The index began on July 12, 1989.

The weekly average yield to maturity on The Bond Buyer’s 40-bond municipal bond index, which is based on 40 long-term municipal bond prices finished at 4.98%, down six basis points from last week’s 5.04%.

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