Heavy supply trumped easy monetary policy this week as muni yields mostly drifted higher despite the announcement of a second quantitative easing campaign from the Federal Reserve.

The Bond Buyer's 20-Bond GO Index of 20-year general obligation yields increased six basis points this week, to 4.02%. This is the highest level since Aug. 19, when it was 4.03%.

The 11-Bond GO Index of higher-grade 20-year GO yields also rose six basis points this week, to 3.77%.

The average weekly yield to maturity of The Bond Buyer Municipal Bond Index, which is based on 40 long-term bond prices, rose four basis points this week, to 4.95%. This is the highest weekly average for the yield to maturity since the week ended Aug. 19, when it was also 4.95%.

The indexes are based on yields quoted Thursday afternoon. The muni market rallied strongly on Thursday, with the Municipal Market Data scales showing a strengthening for the week.

At least until Thursday afternoon, traders and dealers appeared to focus on an impending rush of new state and local government debt. Municipalities are scheduled to sell $16 billion of debt over the next 30 days, according to The Bond Buyer visible supply.

These concerns outweighed the central bank's continuing commitment to anchoring short-term interest rates near zero.

The Fed unveiled a program Wednesday to purchase $600 billion of Treasuries by the middle of next year, or $75 billion a month. The bond market responded by pulling down the yield on the 10-year Treasury 18 basis points, to 2.49%.

The ratio of the 20-Bond GO Index to the 20-year Treasury swelled to 110% this week from 107% a week earlier. The ratio of the 10-year triple-A to the 10-year Treasury rose to 98.8% from 95.5%, according to MMD.

The Revenue Bond Index, which measures 30-year revenue bond yields, gained four basis points this week, to 4.71%. That's its highest level since Aug. 12, when it was 4.74%.

The Bond Buyer's One-Year Note Index declined three basis points this week, to 0.48%, its lowest level since Oct. 14, when it was 0.47%.

The yield on the Treasury's 30-year bond fell one basis point this week, to 4.04%, but remained above its 3.96% level from two weeks ago.

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