The Bond Buyer’s weekly yield indexes increased this week, due largely to substantial weakness on Monday and Tuesday.
Though long-end yields backtracked Thursday and tax-exempts were only slightly weaker Wednesday, the damage done early in the week was enough to keep yields higher overall.
Tax-exempt yields rose as market participants priced in an anticipated rise in long-end tax-exempt issuance in 2011, assuming the expiration of the Build America Bonds program after Dec. 31
Ron Schwartz, who manages the $1.22 billion RidgeWorth Investments Investment Grade Tax-Exempt Bond Fund, said that the year-end lack of liquidity is also adding to the increase in yields.
“They’re maybe a little bit cheap, but part of the reason for that is the lack of liquidity that will remain throughout this year,” Schwartz said.
The Bond Buyer 20-bond index of 20-year general obligation bond yields rose 29 basis points this week to 5.15%. This is the highest level for the index since Jan. 29, 2009, when it was 5.16%. The index has now risen 113 basis points in the past six weeks, from 4.02% on Nov. 4.
The 11-bond GO index of higher-grade 20-year GO yields expanded 27 basis points this week to 4.87%, which is the highest it has been since Jan. 29, 2009, when it was 4.94%. The index has risen 110 basis points in the past six weeks, from 3.77% on Nov. 4.
The revenue bond index, which measures 30-year revenue bond yields, gained 16 basis points this week to 5.48%.
This is its highest level since Aug. 27, 2009, when it was 5.59%. The index has risen 77 basis points in the past six weeks, from 4.71% on Nov. 4.
The Bond Buyer’s one-year note index, which is based on one-year tax-exempt note yields, declined one basis point this week to 0.56%, but remained above its 0.54% level from two weeks ago.
The yield on the 10-year Treasury note rose 18 basis points this week to 3.40%. It is at its highest level since May 13, when it was 3.55%, and has risen 91 basis points the past six weeks, from 2.49% on Nov. 4.
The yield on the 30-year Treasury bond increased 15 basis points this week to 4.56%, which is the highest it has been since April 29, when it was 4.60%. It has risen 52 basis points in the past six weeks, from 4.04% on Nov. 4.
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 5.63%, up 0.22 basis points from last week’s 5.41%.