Nearly all The Bond Buyer's weekly yield indexes rose again this week, as tax-exempt yields continued to rise in all the week's sessions.
George Strickland, managing director and portfolio manager at Thornburg Investment Management, said that "it seems like the only question is how much you get marked down, not whether or not you do."
"There's just a dearth of buyers out there," he said. "I think some of the funds - in particular some of the high-yield funds- are being forced into selling a lot of bonds into a market with no buyers. It's as simple as that."
Strickland also said that supply is weighing on the market, though it's recently been "more secondary supply than primary, because a fair number of these primary market deals are getting pulled."
"For a little while, starting late Tuesday and into Wednesday, it seemed like the market was starting to firm up," he said. "Some of the deals priced real well, but you look at the [$146.2 million] Miami-Dade competitive deal today, that was pretty ugly where they ended up pricing, and Barclays Capital [the winning bidder] told me they had a very long cover on their bid for that deal, so it's hard to figure out where support is going to show up.
"I'm hearing that next week's new issue calendar is pretty light at about $1 billion, and we are going into the holidays, which slows down the calendar," Strickland added. "But if people keep dumping these funds that are down so much, then we'll see more secondary supply."
The municipal market was slightly weaker in light trading Friday, while economic data reported that job losses in November were higher than any month in more than 30 years. After a week of losses, traders said the municipal market showed little activity ahead of the weekend.
On Monday, munis experienced weakness of three to five basis points overall - with losses of as much as 10 basis points on the long end - as Chicago elected to avoid current market conditions and postpone its scheduled sale of $600 million of new-money and refunding general obligation bonds until 2009.
The tax-exempt market was then slightly weaker Tuesday. Traders said tax-exempt yields were lower by two or three basis points overall, with weakness of up to five basis points on the long end.
On Wednesday, the muni market was weaker again, to the tune of two to four basis points, continuing an overall trend in trading sessions this week.
Yesterday, municipals were weaker by about two basis points as market uncertainties dragged on, buyers continued to sit on the sidelines, and Illinois postponed till Tuesday its sale of $1.4 billion of general obligation certificates.
The Bond Buyer 20-bond index of GO yields rose 27 basis points this week to 5.85%. This is its highest level since Oct. 16, when it was 6.01%. The index has risen 72 basis points in three weeks, from 5.13% on Nov. 20.
The 11-bond index of higher-grade 20-year GO yields rose 26 basis points this week to 5.65%, which is the highest since Oct. 16, when it was 5.89%. The index has risen 62 basis points in three weeks, from 5.03% on Nov. 20.
The revenue bond index which measures the yield for 30-year revenue bonds rose 22 basis points this week to 6.39%, which is the highest it has been since Oct. 16, when it was 6.48%. The index has risen 41 basis points since Nov. 20's 5.98% level.
The 10-year Treasury note yield rose eight basis points this week to 2.62%, from last week's half-century low of 2.54%.
The 30-year Treasury bond yield was unchanged from last week's all-time low of 3.06%.
The Bond Buyer one-year note index, which measures the yield for one-year municipal notes, declined eight basis points this week to 1.12%. This is its lowest level since Feb. 13, when it was 1.02%. The index has now fallen 157 basis points from its most recent high of 2.69% on Oct. 15, but only 17 basis points in the past three weeks.
The weekly average yield to maturity on The Bond Buyer 40-bond municipal bond index finished at 6.49%, up 26 basis points from last week's 6.23%.