Most of The Bond Buyer’s weekly yield indexes fell this week, as investors looking to allocate money into tax-exempts gave some firmness to the market. “This is a typical start of the year for munis,” said Phillip Fischer, municipal strategist at Merrill Lynch & Co. “We’re getting very strong demand out of retail, especially as they are taking cash and moving it out on the curve.”The challenge going forward, Fischer said, will be to keep up with the Treasury market.“Treasuries outperformed most fixed-income instruments last year, and I think munis are starting cheap enough so that kind of under performance won’t revisit this market,” Fischer said. “When we hit these kinds of very high ratios, munis are competitive with most taxable products and are very attractive.”The municipal market was firmer by two to three basis points on Friday, as market participants looked to lock in any last-minute year-end losses. Though trading was relatively quiet, the business that was being done did so at firmer levels.On Monday, the market was unchanged to slightly firmer before the New Year’s Day holiday. The firmness was the last of the final positioning for the year end. What firmness there was in the market on Monday was the result of patience on the part of bondholders.With the new year and more reinvestment money on the horizon, market participants were loath to take a hit on bonds they had been holding, traders said.Fresh from the holiday, the market kept up its trend and firmed by three to four basis points on Wednesday. The Institute for Supply Management manufacturing index showed that manufacturing activity for December had begun to contract. Bonds firmed on the news.Yesterday, the market hiccuped in its weekly trend upward. In light to moderate trading, the market was mostly unchanged overall, though some areas along the curve continued to firm. The Bond Buyer 20-bond index of GO yields fell 12 basis points to 4.32%, which is the lowest level since 4.29% on May 17, 2007.The 11-bond index dropped 13 basis points to 4.24%, which is the lowest since 4.23% on May 17, 2007.The revenue bond index fell eight basis points to 4.72%, which is the lowest since 4.67% on Oct. 25, 2007.The 10-year Treasury note fell 30 basis points to 3.89%, which is the lowest since 3.89% on June 2, 2005.The 30-year Treasury bond shed 24 basis points to 4.36%, which is the lowest since 4.35% on Nov. 29, 2007.The Bond Buyer one-year note index rose one basis point to 2.92%, which is the highest since 2.92% on Dec. 12, 2007.The weekly average yield to maturity on The Bond Buyer 40-bond municipal bond index finished at 4.84%, down three basis points from last week’s 4.87%.

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