Indexes Narrowly Mixed as Yields Rise in Each Session

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The Bond Buyer's weekly yield indexes were narrowly mixed this week, despite tax-exempt yields rising modestly in each of the week's sessions.

"Bonds have been getting cheaper by the day, it seems," said Fred Yosca, managing director and head of trading at BNY Capital Markets. "It's not a rout, though. We're still seeing some decent order flow here, but you've got to have the right paper. I think, if you're looking at high-grades, they're off certainly less than lesser-rated bonds. Quality spreads are just widening.

"I think credit fear is a part of it, and general uncertainty," Yosca said. "That and lesser cash flows, typically at this time of year. February, March, and April are big months for reinvestment."

The municipal market was weaker by two or three basis points Friday as the week drew to a close. Then, with trading activity in the market somewhat light, yields in the tax-exempt market rose by up to three basis points Monday. On Tuesday, municipal yields were flat to slightly elevated Tuesday, following a largely unchanged morning. Traders said the weakness in the tax-exempt market was found mostly within the first 10 years of the curve.

Yields in the municipal market rose by two or three basis points on Wednesday, as New York City came to market with the week's largest scheduled transaction. Citi priced the $720 million of tax-exempt and taxable general obligation bonds yesterday in two series, upsized from an expected $520 million thanks to higher than anticipated institutional demand.

Tax-exempt yields edged higher by two or three basis points again Thursday, while one of the week's largest scheduled transactions was priced in the new-issue market. Merrill Lynch & Co. priced $440.8 million of electric and gas systems revenue refunding bonds for San Antonio.

The Bond Buyer 20-bond index of GO yields declined two basis points this week to 4.87%, which is the lowest the index has been since Jan. 15, when it was 4.80%.

The 11-bond index of higher-grade 20-year GO bond yields also declined two basis points this week, to 4.65%, which is its lowest level since Jan. 15, when it was 4.59%.

The revenue bond index, which measures 30-year revenue bond yields, rose six basis points to 5.76%, which is the highest the index has been since Jan. 29, when it was 5.89%.

The 10-year Treasury note yield rose 13 basis points this week to 2.99%, which is its highest level since Nov. 25, 2008, when it was 3.09%.

The 30-year Treasury bond yield dropped two basis points this week to 3.66%, but remained above its 3.49% level from two weeks ago.

The Bond Buyer one-year note index, which measures one-year municipal note yields, declined two basis points this week to 0.80%, but remained above its 0.79% level from two weeks ago.

The weekly average yield to maturity on The Bond Buyer 40-bond municipal bond index, which is based on long-term tax-exempt bond prices, finished at 5.56%, up two basis points from last week's 5.54%. However, that remained below the weekly average yield to maturity of 5.63% from two weeks earlier.

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