Most of The Bond Buyer's weekly yield indexes rose this week, as losses in the municipal market outweighed gains.
"It's been extremely difficult week for the market because the market has been dealing with a lot of volatility in the taxable market," said Matt Fabian, managing director at Municipal Market Advisors.
Fabian also said that "thinner dealer liquidity has finally started to affect trading, with UBS formally leaving the market last week." And with firms scaling back, there are fewer people on trading desks to analyze trades and make bids. He said it could be months before the liquidity issue is resolved.
"This week, we've had some liquidity scares," Fabian said. "Liquidity will be coming back, but in the short-term we have a problem."
Demand has also been weak beyond the primary market. Some traders expect the June and July reinvestment periods to eventually stimulate demand, but Fabian cautions that may not occur.
"Retail reinvestment is not a sure thing in any environment, and you have a fairly strong stock market that could steal assets from munis, like it did a year ago last summer," Fabian said. "So it's certainly not a sure thing that the reinvestment is going to drive prices up."
The municipal market was firmer by one or two basis points Friday, following Treasuries, which showed gains after the non-farm payrolls report showed a loss of jobs for the fifth straight month in May, and the unemployment rate spiked 5.5%, the largest monthly jump in 20 years.
Tax-exempts were weaker by about four basis points Monday, following the declining Treasury market, which showed sizeable losses. Munis were again weaker Tuesday, by three to five basis points, following Treasury market yields, which continued to push higher.
On Wednesday, tax-exempt yields were higher by three to five basis points on the short end, were unchanged in the intermediate maturities, and were weaker by two or three basis points on the long end.
Yesterday, municipal yields were higher by five to nine basis points, following Treasuries.
The Bond Buyer 20-bond index of GO yields rose 10 basis points this week to 4.69%, which is the highest since April 3, 2008, when it was 4.90%.
The 11-bond index rose 11 basis points to 4.60%, which is the highest since April 3, when it was 4.82%.
The revenue bond index rose 10 basis points to 5.14%, which is the highest since April 3, when it was 5.18%.
The 10-year Treasury note yield rose 17 basis points to 4.22%, which is the highest since Nov. 8, 2007, when it was 4.30%.
The 30-year Treasury bond yield rose two basis points to 4.77%, which is the same level as two weeks ago.
The Bond Buyer one-year note index fell four basis points to 1.72%, which is the lowest since April 23, when it was 1.69%.
The weekly average yield to maturity on The Bond Buyer 40-bond municipal bond index finished at 5.17%, up four basis points from last week's 5.13%.