Most of The Bond Buyer's weekly yield indexes rose last week, as municipal bonds cheapened significantly compared to Treasuries.

"Munis have been trading in their own zone, very different from where treasuries are traded," said Howard Mackey, president of the broker-dealer business unit of Rice Financial Products.

The ratio between triple-A rated, 30-year general obligation bonds and 30-year Treasury bonds reached 104.72% on Wednesday, its highest since April, according to Municipal Market Data. The ratio stood as low as 97.49% last week.

Mackey attributed part of the softness and decline in liquidity in the municipal market to recent downgrades of insurers. One result was forced selling from institutions that require certain ratings on insured bonds. The markets will closely monitor insurers, especially the three that still have triple-A ratings, in upcoming weeks, he said.

"Right now, I think the key watch is going to be the other insurers on the horizon," Mackey said. "There's going to be some very close scrutiny, particularly of [Financial Security Assurance Inc.] and [Assured Guaranty Corp.] to make sure there's no rumblings there."

After a week of losses, the market ended last Friday unchanged to weaker on very quiet trading, despite gains in the Treasury market.

The market was weaker on Monday, also in light trading, while the Treasury market was mixed.

On Tuesday, the market was again weaker, with Citi pricing $1.5 billion of various purpose GOs for California in the week's largest deal.

On Wednesday, the market was again weaker as the Federal Reserve announced its decision to hold the federal funds rate steady at 2%.

Yesterday, municipal bonds gained in light trading, taking a cue from Treasuries, as the Dow Jones industrial average hit a new low for 2008. A number of one-year notes issues came to the market, including $800 million from Wisconsin and $350 million from Colorado.

The Bond Buyer 20-bond index rose seven basis points this week to 4.83%, its highest since April 3 when it was 4.90%.

The 11-bond index rose eight basis points to 4.74%, its highest since it hit 4.82% on April 3.

The revenue bond index rose five basis points this week to 5.25%, the highest since July 6, 2006, when it was 5.31%.

The 10-year Treasury note yield fell 17 basis points to 4.05%, its lowest since it also hit 4.05% on June 5.

The 30-year Treasury bond yield fell 16 basis points to 4.61%, its lowest since May 12, when it was 4.56%.

The Bond Buyer one-year note index fell four basis points to 1.69%, its lowest since April 23, when it was also 1.69%.

The weekly average yield to maturity of The Bond Buyer 40-bond municipal bond index rose eight basis points to 5.25%, its highest since June 17, 2004, when it was 5.27%.

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