Muni bond yields have mostly started 2012 where 2011 left off: outperforming Treasury yields.

The holiday-shortened week has seen a general softening in both yield curves. But the Treasury market has seen a more pronounced sell-off.

Municipal bond indexes largely reflected this. While muni indexes mostly fell on the week, those for Treasuries all rose.

The Bond Buyer’s 20-bond index of 20-year general obligation yields declined five basis points this week to 3.83%. That marks its lowest level since Aug. 18, when it was also 3.83%.

The 11-bond index of higher-grade 20-year GO yields also dropped five basis points this week, to 3.57%, which is its lowest level since Aug. 18, when it was 3.55%.

The yield on the U.S. Treasury’s 10-year note rose 10 basis points this week to 2.00%. It sits at its highest level since Dec. 1, when it was 2.11%. The yield on the 30-year Treasury gained 16 basis points this week to 3.06%, which represents its highest level since Dec. 1, when it was 3.12%.

Muni yields on Thursday seemed to have found their December stride, according to Municipal Market Data numbers. They firmed one basis point and three basis points, respectively, on the intermediate and long ends of the curve in the day’s session.

One factor to gauging muni market health stems from the primary, said Justin Hoogendoorn, managing director of the strategic analytics group for BMO Capital Markets’ fixed-income team.

“We really haven’t gotten much of a mood in munis because we haven’t seen much supply yet,” he said. “It’s really allowed munis to outperform Treasuries moving into year-end. We should continue to see a building of the calendar into February.”

On the week, municipal yields mostly held their levels. They rose at the start of the week and strengthened as the week wore on.

The benchmark 10-year triple-A rose slightly for the week, weakening four basis points, compared to the 12-basis-point jump Treasury yields saw. The 30-year muni yield, meanwhile, dropped one basis point over the week.

The Treasury yield, by comparison, rocketed 17 basis points.

Subsequently, muni-to-Treasuries ratios got richer on the intermediate and long ends of the curve.

The 10-year ratio fell to 93.50% for the week, leaving it below its average for 2011, at 97.37%. The 30-year ratio fell throughout the week, landing at 115.69%. But it remained above its average for 2011, at 109.40%.

At an estimated $543 million, volume was very light. But some investors were still active.

“You’re seeing pretty decent retail demand,” Hoogendoorn said. “That’s coming in the intermediate part of the curve.

“We’ve seen the best performance in the mid-range of the curve,” he added. “It’ll generally continue, in that we’re going to have enough demand to soak up what supply is coming for a majority of January.”

The revenue bond index, which measures 30-year revenue bond yields, fell four basis points this week to 4.93%. It now sits at its lowest level since Nov. 10, 2010, when it was 4.87%. The Bond Buyer’s one-year note index rose one basis point this week to 0.28%, which is its highest level since Dec. 7, when it was 0.29%.

The weekly average yield to maturity of the Bond Buyer municipal bond index, which is based on 40 long-term bond prices, declined three basis points this week to 4.84%.

That figure is the lowest weekly average for the yield to maturity since the week ended Feb. 14, 2008, when it was also 4.84%.

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