Strong reception to new issues on Monday and Tuesday and secondary activity on Thursday propelled the municipal market to a week of falling yields at the intermediate and long ends of the curve.
Healthy appetite to a massive California deal for $1.78 billion of general obligation bonds started the week off on a strong note.
A midweek holiday halted momentum somewhat, but vigorous dealers-to-dealer trading and interest in the aforementioned Cal GOs in the secondary kick-started the market on Thursday.
True to form, muni bond indexes tracking all but the short end of the yield curve also fell, reflecting the fall in rates there. The 20-bond index of 20-year GO yields dropped five basis points this week to 3.67%, the lowest level for the index since Aug. 2, when it was 3.66%.
The 11-bond index of higher-grade 20-year GO yields also fell five basis points this week to 3.46%. That is its lowest level since Aug. 2, when it was 3.45%.
The yield on the U.S. Treasury's 10-year note declined 14 basis points this week to 1.64%. That is its lowest level since Aug. 30, when it was 1.63%.
The yield on the Treasury's 30-year bond also dropped 14 basis points this week to 2.82%, which is its lowest level since Sept. 6, when it was 2.80%.
Light issuance over much of the month coupled with sustained demand has driven prices higher. "Supply has been disappointing," said Michael Pietronico, chief executive officer at Miller Tabak Asset Management.
"On the upside, from that perspective, investors got caught perhaps with more cash then they wanted. Our expectation here is that October is probably going to be a nice opportunity to put cash to work if the calendar picks up," he added.
Treasury yields, boosted by relatively soft economic numbers, had a strong week. They both outperformed and towed along muni yields.
"We're trending with Treasuries," Pietronico said. "As far as the underperformance, it's really not that unusual, given where rates are, and the fact that munis generally underperform when the market rallies."
Yields from the belly of the curve on out followed those of Treasuries on the week since last Friday, Municipal Market Data numbers showed.
The benchmark triple-A muni yield fell eight basis points over the period to 1.71%.
The 30-year yield dropped seven basis points to 2.88%. The two-year yield ticked up one basis point to 0.30%.
Muni underperformance strengthened ratios to Treasuries, leaving them in richer territory above 100% across the curve.
The Bond Buyer's one-year note index, which is based on one-year GO note yields, increased one basis point this week to 0.23%, but remained below its 0.24% level from two weeks ago.
The Bond Buyer's revenue bond index, which measures 30-year revenue bond yields, declined six basis points this week, to 4.31%, its second consecutive all-time low. The Bond Buyer began calculating the revenue index on Sept. 20, 1979.
The weekly average yield to maturity of The Bond Buyer municipal bond index, which is based on 40 long-term bond prices, declined five basis points this week to an all-time low of 4.21% for the week ending Thursday.
The previous record low was 4.22%, set during the week ended Aug. 30. The Bond Buyer began calculating the yield to maturity on Jan. 1, 1985.