The Bond Buyer's weekly yield indexes were mostly higher this week, as early week gains were washed out by losses over the past two trading sessions.
Fred Yosca, managing director and head of trading at BNY Capital Markets, said tax-exempts showed gains Friday, Monday, and Tuesday, but gave those gains back over the course of Wednesday and yesterday.
"Driving yields lower earlier in the week was continued good flow. We were seeing very good business," Yosca said. "I think, also, we picked up retail insurance from that sort of a safe-haven kind of mentality. After Treasuries, what's the next best credit in the fixed-income world domestically? Well, it's not corporates, and it used to be agencies, but no one's buying that theory anymore either. So what are you left with? High-grade munis. I think that mentality was borne out by quality spreads in the muni market."
"Then, later on in the week, we lost some of the crossover ratio to Treasuries," he said. "I think people may be focusing the last day or two a little more on fundamentals, with some of the stronger economic numbers, and the stock market getting a little joy out of the drop in oil. I think that's taking a little wind out of the sails of the fixed-income appeal."
The municipal market was weaker by one or two basis points Friday, mostly holding off a sell-off in the Treasury market prompted by concerns over whether or not the federal government would intervene to shore up confidence in troubled Fannie Mae and Freddie Mac.
Then Monday, tax-exempts again did not mirror the Treasury market's flight-to-quality buying response to the Fannie Mae and Freddie Mac news, remaining muted as details of the government's plan to support the two government-sponsored enterprises became more concrete.
The muni market was firmer by about three basis points Tuesday, following Treasury gains, as a $1.1 billion deal for New York's Triborough Bridge and Tunnel Authority came to market. Citi priced more than $1.1 billion of revenue bonds for the TBTA in two series.
Also Tuesday, Federal Reserve Board chairman Ben Bernanke began his two-day semiannual testimony before Congress, speaking before the Senate Banking Committee. He said that while the direction of interest rates is unclear, helping financial markets return to normalcy is a top priority. He then reiterated those comments before the House Financial Services Committee Wednesday.
On Wednesday, however, munis were slightly weaker, following Treasuries. This weakness persisted into yesterday, when tax-exempts were weaker by about three basis points, again taking their cue from the Treasury market.
The Bond Buyer 20-bond index of GO yields and the 11-bond index both rose nine basis points this week, to 4.65% and 4.56%, respectively. These remained below their levels from two weeks ago, when they were 4.67% and 4.58%, respectively.
The revenue bond index rose seven basis points, to 5.11%, but it remained below its 5.14% level from two weeks ago.
The 10-year Treasury note rose 24 basis points, to 4.05%, which is its highest level since June 26, when it was also 4.05%.
The 30-year Treasury bond rose 27 basis points, to 4.65%, which is its highest level since June 19, when it was 4.77%.
The Bond Buyer one-year note index fell eight basis points, to 1.54%, which is its lowest level since April 9, when it was also 1.54%.
The weekly average yield to maturity on The Bond Buyer 40-bond municipal bond index finished at 5.15%, up three basis points from last week's 5.12%.