Yields Dip a Bit Despite Some Secondary Weakness

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Most of The Bond Buyer's weekly yield indexes declined slightly this week, despite weakness in the municipal secondary market through Tuesday.

"Munis feel good. There's a pretty good tone as we get into that pre-holiday mode," said Evan Rourke, portfolio manager at Eaton Vance. "We're seeing some outperformance on the long end, which is the cheapest part of the curve."

"Dealers are more relaxed in their bidding," he said. "Nobody felt the need to do any down business yesterday. Also, volume sort of dropped off in the last half of the week. There was an absence of a lot of new issues — it was relatively light."

Tax-exempt yields were flat to weaker by about one or two basis points on Friday, Monday, and Tuesday, before coming in largely unchanged Wednesday. Yesterday, munis were flat to slightly firmer.

Leading new issues this week, Pennsylvania sold $800 million of tax anticipation notes. In the longer term, the Brooklyn Arena Local Development Corp. sold $511 million of bonds backed by payments in lieu of taxes.

The Bond Buyer 20-bond index of 20-year general obligation bond yields declined one basis point this week to 4.18%. That is the lowest level for the index since Oct. 8, when it was 4.06%. The index has now declined six consecutive weeks for a cumulative decline of 23 basis points.

The 11-bond index of higher-grade 20-year GO yields also dropped one basis point this week to 3.90%, which is the lowest it has been since Oct. 8, when it was 3.80%. It also has declined six weeks in a row for a cumulative loss of 24 basis points.

The revenue bond index, which measures 30-year revenue bond yields, fell one basis point this week to 4.92%. That is the lowest level for the index since Oct. 22, when it was 4.87%. It has fallen four weeks in a row.

The yield on the 10-year Treasury note rose one basis point this week to 3.49%, which is the highest it has been since Nov. 5, when it was 3.54%.

The yield on the 30-year Treasury bond declined seven basis points this week to 4.42%, but it remains above its 4.33% level from two weeks ago.

The Bond Buyer one-year note index, which is based on one-year tax-exempt note yields, dropped three basis points this week to an all-time low of 0.46%, for its third consecutive record low. 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 5.38%, up one basis point from last week's 5.37%.

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