The Bond Buyer's weekly yield indexes declined this week, as municipals grew firmer in each of the week's sessions until yesterday, when yields did an about-face.

"Coming into [yesterday], we had continued to rally a little bit, and the scale had a little bit of flattening," said Evan Rourke, portfolio manager at MD Sass. "However, we reversed some of that. We had steepened pretty impressively for about month, and I think we picked up about 30 basis points. So to see a little bit of flattening come back in is not that surprising."

Tax-exempts were unchanged to slightly firmer Friday, after the January non-farm payrolls report showed that 17,000 jobs were cut in January, but its effect was tempered by an upwardly revised December non-farm payrolls figure. The drop followed a revised 82,000 increase the previous month. Economists polled by IFR Markets had predicted that 58,000 new jobs were created in January.

The decline marked the first contraction in jobs since 2003, though it comes with the following caveat: non-farm payrolls were negative in August 2007, reported a drop of 4,000, before being upwardly revised the following month to show a gain of 89,000 jobs. Additionally, muting the impact of Friday's 17,000-job dip, the December figure was upwardly revised from 18,000 new jobs created to 82,000.

The muni market was unchanged to slightly weaker yesterday in light trading Monday, following Treasuries. Then, on Tuesday, munis were firmer by about three or four basis points, again following gains in the Treasury market.

The tax-exempt market was largely unchanged Wednesday. Traders said tax-exempt yields were lower by up to two or three basis points in bonds maturing within two years, but the remainder of the curve was fairly flat.

Finally, the municipal market was weaker by three to five basis points yesterday, following Treasuries, which saw yields rise after its 30-year Treasury bond auction. Also yesterday, California came to market with $3.2 billion of bonds, the week's largest transaction.

The Bond Buyer 20-bond index of GO yields fell six basis points this week to 4.33%, but remained above its 4.29% level from two weeks ago.

The 11-bond index dropped seven basis points to 4.24%, but remained above its 4.20% level from two weeks ago.

The revenue bond index fell four basis points to 4.72%, but remained above its 4.71% level from two weeks ago.

The 10-year Treasury note, however, rose 11 basis points to 3.75%, which is the highest since 3.90% on Jan. 10.

The 30-year Treasury bond rose 17 basis points to 4.52%, which is the highest since 4.60% on Dec. 27, 2007.

The Bond Buyer one-year note index fell 62 basis points to 1.27%. This is the lowest figure for the index since April 28, 2004, when it was also 1.27%. The 62-basis-point decline is the fourth largest on record, and the largest since a 65-basis-point drop on Feb. 6, 1991.

The weekly average yield to maturity on The Bond Buyer 40-bond municipal bond index finished at 4.81%, down five basis points from last week's 4.86%. q

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