Nearly All Yields Decline Amid Slew of BAB Deals

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Nearly all The Bond Buyer's weekly yield indexes declined this week as the primary market took center stage, predominantly with a slew of Build America Bond issuance, amid mostly light secondary market trading.

On the whole, municipals were unchanged through most of the week's sessions, but the tone remained positive.

"I think we're just kind of stalled out in a trading range. But it's feeling very late summer doldrum-y," said George Strickland, managing director and portfolio manager at Thornburg Investment Management. "There's still pretty good primary supply, though. There's some activity in the secondary, but not a ton."

Leading the new-issue market this week, Barclays Capital priced $1.3 billion of bonds, including just over $1 billion of BABs, for the University of California, and Merrill Lynch & Co. priced $1.2 billion of BABs for the Texas Transportation Commission. Also, both JPMorgan and state Treasurer Bill Lockyer confirmed that JPMorgan will lend California $1.5 billion via a private placement that will allow the state to pay off IOUs issued during a budget stalemate and cash-flow crisis this summer.

Against that backdrop, The Bond Buyer 20-bond index of 20-year general obligation bond yields declined seven basis points this week to 4.58%. This is the lowest level for the index since May 21, when it was 4.44%.

The 11-bond index of higher-grade 20-year GO yields also declined seven basis points this week, to 4.31%. It has not been lower since May 21, when it was 4.18%.

The revenue bond index, which measures 30-year revenue bond yields, declined four basis points this week, to 5.62%, which is the lowest the index has been since May 28, when it was 5.53%.

At the same time, the 10-year Treasury note yield declined 17 basis points this week to 3.43%, which is the lowest level for the yield since July 9, when it was 3.41%. The 30-year Treasury bond declined 19 basis points this week to 4.23%. This is the lowest the 30-year bond's yield has been since May 14, when it was 4.07%.

The Bond Buyer one-year note index rose one basis point to 0.84%, which is the highest the index has been since July 8, when it was 0.90%.

The weekly average yield to maturity on The Bond Buyer's 40-bond municipal bond index declined 11 basis points this week to 5.45%. This is the lowest weekly average for the yield to maturity since the week ended June 25, when it was 5.44%.

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