Most Indexes Decline Slightly in Holiday-Shortened Week

The Bond Buyer's yield indexes mostly declined slightly in this holiday-shortened week, as municipals remained little changed through most of the sessions.

However, short-term paper experienced more pronounced gains, leading to The Bond Buyer's one-year note index falling 30 basis points.

Despite this, Michael Pietronico, chief executive officer at Miller Tabak Asset Management, said that the muni market right now "seems pretty skittish."

"Credit quality has been sort of questioned because of the weakness in the monoline insurers," Pietronico said. "But now, with economic data turning notably down, I think people are taking a second look at credits, and wondering where they will be if we're in a deep recession for a long period of time."

"So, fundamentally, I think the shift has gone not from what if we move into recession, but now that we are in recession, what does that mean for municipal credits?" he said. "Without the comfort of triple-A insurance being there, I think folks are quite reluctant to make large bets, and there is probably some fear out there that there's going to be some crossover selling from some of the larger accounts, and I think that keeps the bid rather tentative in here."

The municipal market was slightly firmer Friday, lagging the rallying Treasury market. On Monday, munis were unchanged, despite Treasury gains, as traders sat on the sidelines in the throes of more market uncertainty.

The Treasury market firmed Monday on a flight-to-safety bid after news the Federal Reserve cut the primary credit discount rate - the lending rate for loans to financial institutions - 25 basis points to 3.25%, and that JPMorgan Chase & Co. had agreed to purchase Bear, Stearns & Co., with the Fed providing a $30 billion liquidity facility. However, coming a day prior to the Fed's scheduled monetary policy meeting, many muni market participants chose to remain on the sidelines.

The municipal market was unchanged to slightly weaker Tuesday, as the Federal Open Market Committee cut the federal funds rate target 75 basis points to 2.25%. However, the marked idled following the announcement, and straight through yesterday, as munis were unchanged to one basis point firmer yesterday in light activity, ahead of tomorrow's early close and the ensuing long weekend.

The Bond Buyer 20-bond index of GO yields fell six basis points this week, to 4.88%, which is the lowest since Feb. 21, when it was 4.66%.

The 11-bond index fell three basis points, to 4.82%, which is the lowest since Feb. 21, when it was 4.56%.

The revenue bond index rose two basis points, to 5.17%, which is the highest since Feb. 28, when it was 5.22%.

The 10-year Treasury note fell 18 basis points, to 3.36%, which is the lowest since June 19, 2003, when it was 3.34%.

The 30-year Treasury bond fell 35 basis points, to 4.22%, which is the lowest since June 30, 2005, when it was 4.20%.

The Bond Buyer one-year note index fell 30 basis points, to 1.77%, which is the lowest since Feb. 13, when it was 1.02%.

The weekly average yield to maturity on The Bond Buyer 40-bond municipal bond index finished at 5.21%, up seven basis points from last week's 5.14%.

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