Nearly all The Bond Buyer's weekly yield indexes were somewhat lower this week on the whole, as municipals showed gains but lagged behind a massive Treasury rally.

Michael Pietronico, chief executive officer of Miller Tabak Asset Management, said that the market "overall has improved" over the past week, but that "most of the improvement is on the higher-quality general obligation side."

"Overall, the market's improved, but a very select portion of the market is doing appreciably better than the rest," Pietronico said. "The continuing weakening of the economy is lending more demand to higher-quality bonds for investors seeking safety. I would think moving forward from here to the end of the year, bonds 10 years and shorter should outperform the balance of the yield curve, and I would expect that the overall activity levels would be quite quiet. I see more risk aversion seeping into the market."

The municipal market was slightly firmer Friday. Traders said tax-exempt yields were flat to lower by two or three basis points. Treasuries rallied on the flight to quality, with the 30-year bond hitting an all-time low yield of 3.65%.

The moves came as the economy continued to weaken. In data released Friday, retail sales dropped 2.8% in October after a revised 1.3% decline the previous month. Economists polled by Thomson Reuters had predicted a 2.0% decline.

This week started with munis slightly firmer. Traders said tax-exempt yields were again flat to lower by two or three basis points. This was followed Tuesday by another session of gains of three or four basis points.

On Wednesday, tax-exempts were unchanged to slightly firmer as a number of sizeable deals were priced in the new-issue market. JPMorgan priced for retail investors $523 million of power supply revenue bonds for the California Department of Water Resources, Merrill Lynch & Co. priced $425 million of bonds tax-exempt and taxable bonds for New York City, JPMorgan priced $350 million of bonds for the Municipal Electric Authority of Georgia, and Seattle competitively sold $215.8 million of water system improvement and refunding revenue bonds to Merrill Lynch.

Despite the new issue supply the market was slightly firmer Thursday, lagging behind a sizeable rally in the Treasury market.

The Bond Buyer's 20-bond index of general obligation bond yields fell one basis point this week to 5.13%. That was the lowest level for the index since Sept. 18, when it was 5.03%.

The 11-bond index of higher-grade GO yields was unchanged this week at 5.03%, its lowest level since Sept. 18, when it was 4.94%.

The 30-year revenue bond index also was unchanged this week at 5.98%, which is the lowest level since Oct. 9, when it was 5.97%.

The Bond Buyer indexes moved against the backdrop of the 10-year Treasury note yield, which dropped 75 basis points to 3.11%. That is the lowest yield for the note since 3.10% in 1956. The previous low was 3.14% on June 12, 2003.

The 30-year Treasury bond yield dropped 69 basis points, to 3.65%. That is the all-time low for the bond, breaking the previous record of 3.99% on Oct. 23.

The Bond Buyer's one-year note index of tax-exempt GO yields declined 24 basis points this week, to 1.29%. That's the lowest the index has been since Feb. 13, when it was 1.02%. The index has fallen 140 basis points in five weeks, from 2.69% on Oct. 15.

However, the weekly average yield to maturity on The Bond Buyer 40-bond municipal bond index finished at 5.92%, up seven basis points from last week's 5.85%.

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