Nearly all of The Bond Buyer's weekly yield indexes increased this week, as uncertainty in the auction-rate market helped push yields higher through the latter part of the week.

"Auction rates are really the story of the week. They're adding a lot of uncertainty to the picture," said Fred Yosca, managing director and head of trading at BNY Capital Markets. "I think the auction-rate situation by and large is going to resolve itself, at least as far as the municipal credits go, but right now there's so much fear and uncertainty that it's affecting everything."

The municipal market was slightly firmer Friday, following the rallying Treasury market. Traders said that while tax-exempt yields were lower by one or two basis points throughout maturities two years and out, bonds maturing in one year saw significant firmness.

Tax-exempts yields were then slightly lower Monday, following Treasuries, though one-year paper again saw tremendous gains.

On Tuesday, munis followed Treasuries, which showed losses after billionaire Warren Buffett announced that he had offered to reinsure $800 billion of municipal bonds backed by Ambac Assurance Corp., MBIA Insurance Corp., and Financial Guaranty Insurance Co. Traders said tax-exempt yields were higher by about three basis points.

The weakness continued Wednesday and yesterday, as uncertainty in the auction-rate securities market helped bump up Treasury and muni yields.

On Wednesday, tax-exempt yields were lower by as much as three or four basis points on the long end and unchanged to lower by one or two basis points on the short end, in fairly light trading, traders said. And yesterday, municipals were weaker by three or four basis points overall, though there was more significant weakness with long bonds.

The Bond Buyer 20-bond index of GO yields rose 14 basis points this week to 4.47%, which is its highest level since Nov. 15, 2007, when it was 4.53%.

The 11-bond index also rose 14 basis points to 4.38%, which is its highest level since Dec. 13, 2007, when it was 4.39%.

The revenue bond index rose 10 basis points to 4.82%, which is its highest level since Nov. 15, 2007, when it was 4.85%.

The 10-year Treasury note rose 10 basis points to 3.85%, which is its highest level since Jan. 10, when it was 3.90%.

The 30-year Treasury bond rose 16 basis points to 4.68%, which is its highest level since Nov. 8, 2007, when it was also 4.68%.

The Bond Buyer one-year note index, however, fell 25 basis points to 1.02%, which is its lowest level since March 17, 2004, when it was 0.99%. The one-year note index has fallen 190 basis points since the beginning of 2008.

The weekly average yield to maturity on The Bond Buyer 40-bond municipal bond index finished at 4.84%, up three basis points from last week's 4.81%. q

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