The Bond Buyer's weekly yield indexes declined this week as a firmer tone persisted throughout the week, and yields in the municipal market dropped in nearly all the week's sessions.

"There was a lot of flattening here," said Evan Rourke, portfolio manager at MD Sass. "You had a big rally due largely to buying on the long end. And some of that initially we heard might have been from dealer buying tied into derivatives, and that they had written certain different kinds of derivative transactions based on attractiveness of the muni bond market relative to other markets."

But on Wednesday, "it seemed liked a lot of the buying was driven by more traditional buyers, funds trying to catch up, and put some money to work, because they had sort of been sitting on their hands," Rourke said.

"It slowed down a little [Thursday], though," he said. "Deals [Wednesday] were eight and 10 times oversubscribed, with enormous bumps. But [yesterday], deals are getting done, but certainly not with the same passion."

The municipal market was firmer by three to five basis points Friday following a larger-than-expected drop in March nonfarm payrolls. Payrolls dropped 80,000 in March, after a revised 76,000 decline the previous month. Economists polled by IFR Markets had predicted that 50,000 jobs were lost in March.

Munis were then unchanged to slightly weaker Monday, following the Treasury market.

However, on Tuesday the tax-exempt market ended the session on a firm note amid robust retail demand for bonds from California's $1.75 billion general obligation issue. Tax-exempt yields fell by as much as two to four basis points in the secondary as evidenced by firm new-issue pricing and in spite of a large $350 million to $360 million bid-wanted list from an arbitrage account that circulated earlier in the day.

On Wednesday, tax-exempts were firmer by three to seven basis points as increased retail demand in the market continued. But yesterday, the municipal market was largely unchanged, as California priced for institutional investors its $1.75 billion deal.

The Bond Buyer 20-bond index of GO yields fell 29 basis points this week to 4.61%, its lowest level since Feb. 14, when it was 4.47%.

The 11-bond index also dropped 29 basis points, to 4.53%, its lowest level since Feb. 14, when it was 4.38%.

The revenue bond index fell 14 basis points to 5.04%, the lowest level since Feb. 21, when it was 4.94%.

The 10-year Treasury note fell six basis points to 3.53%, its lowest level since March 19, when it was 3.36%.

The 30-year Treasury bond also fell six basis points, to 4.32%, its lowest level since March 19, when it was 4.22%.

The Bond Buyer one-year note index fell four basis points to 1.54%, its lowest level in nearly two months, since it was 1.02% on Feb. 13.

The weekly average yield to maturity on The Bond Buyer 40-bond municipal bond index finished at 5.04%, down 15 basis points from last week's 5.19%.


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