All The Bond Buyer's weekly yield indexes declined this week, as gains outweighed losses.

"We haven't seen a whole lot of change in the market," said Howard Mackey, president of the broker-dealer business unit of Rice Financial Products. "I think, at this point, just from one week to the next, we're seeing a lot of volatility, and a lot of it tends to be a combination of reactions in the stock market, and concern about inflation."

"Right now, I think that the high-grades are going to track the Treasury market more closely than any other sectors within the muni market," he continued. "Lower-grade bonds are still going to trade in their own world with a lot less liquidity. I think the market is going to continue to be volatile, because everybody is still waiting to see if there's any more news that might break that could have a negative effect on the bond market, and as a result, we're going to continue to have a fair amount of volatility. People will get involved in the markets only where they know there's liquidity, so that pretty much steers people toward the high grade sectors of the market."

The municipal market was unchanged to slightly firmer Friday, with gains of one or two basis points, at most. On Monday tax-exempt yields dipped again, by about two basis points.

Also Monday, a $1.2 billion offering of New York City variable-rate demand bonds led the way in the primary market this week.

On Tuesday, tax-exempts did a mild about-face, growing weaker by about two or three basis points, almost wiping out Friday and Monday's gains. The trend continued Wednesday, as munis weakened by about another basis point.

In the new-issue market Wednesday, Morgan Stanley priced $617 million of school facilities construction bonds for the New Jersey Economic Development Authority in 10 series. The deal is converting auction-rate securities to fixed-rate bonds.

However, yesterday, municipal yields were lower by about one or two basis points, essentially nullifying Wednesday's losses.

The Bond Buyer 20-bond index of GO yields fell six basis points this week to 4.90%, but remained above its 4.88% level from two weeks ago.

The 11-bond index also dropped six basis points, to 4.82%, matching its 4.82% level from two weeks ago.

The revenue bond index also fell six basis points, to 5.18%, but remained above its 5.17% level from two weeks ago.

The 10-year Treasury note rose five basis points to 3.59%, its highest level since March 6, when it was 3.61%.

The 30-year Treasury bond fell one basis point to 4.38%, but remained above its 4.22% level from two weeks ago.

The Bond Buyer one-year note index fell nine basis points to 1.58%, its lowest level in nearly two months, since when it was 1.02% on Feb. 13.

The weekly average yield to maturity on The Bond Buyer 40-bond municipal bond index finished at 51.9%, down three basis points from last week's 5.22%.


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