Nearly all the Bond Buyer’s weekly yield indexes declined this week, as the tax-exempt market firmed in nearly all of the week’s sessions. “Clearly the year-end supply-demand dynamics have influenced the direction of the market this week,” said Fred Yosca, managing director and head of trading at BNY Capital Markets. “The Treasury market making its comeback was also a factor. The Treasury gains have also improved the crossover ratio as well, so we look better. Overall though, year-end thinking is definitely taking over.” The municipal market was unchanged to slightly weaker Friday, as economic data came in mostly higher than expected. The consumer price index grew 0.8% in November, and the core CPI rose 0.3% in November. Economists polled by IFR Markets had predicted a 0.7% gain in CPI and a 0.2% jump in core CPI. Munis were unchanged with a slightly firmer tone in light trading Monday, as market participants began to wind down operations for the year. Then, the tax-exempt market was firmer by about two or three basis points Tuesday, as the week’s largest new issuance came to the primary market. City Securities Corp. priced $386 million of bonds and notes for the Indianapolis Local Public Improvement Bond Bank in two series. The municipal market was slightly firmer Wednesday, following Treasuries, against a backdrop of a Standard & Poor’s downgrade of ACA Financial Guaranty Corp. to CCC from A, and placed AAA rated Ambac Assurance Corp., MBIA Insurance Corp., and XL Capital Assurance Inc. on negative outlook. Financial Guaranty Insurance Co. was placed on negative watch. Traders said tax-exempt yields were lower by about two or three basis points, and that the ACA downgrade would have little effect on the secondary market, as the bonds wrapped in ACA insurance have been trading based on their underlying ratings for months. Then, yesterday, tax-exempts were firmer by about one or two basis points, in light trading.The Bond Buyer 20-bond index of GO yields fell seven basis points this week to 4.39%, but remained above its 4.38% level from two weeks ago. The 11-bond index dropped eight basis points to 4.31%, which was the same as two weeks ago.The revenue bond index fell three basis points to 4.76%, but remained above its 4.74% figure from two weeks ago. The 10-year Treasury note fell 12 basis points to 4.05%, but remained above its 4.02% level from two weeks ago. The 30-year Treasury bond fell 15 basis points to 4.47%, its lowest level since Nov. 29, when it was 4.35%. The Bond Buyer one-year note index fell five basis points to 2.87%, its lowest level in more than two years, since when it was 2.83% on Sept. 21, 2005. The weekly average yield to maturity on The Bond Buyer 40-bond municipal bond index finished at 4.85%, up two basis points from last week’s 4.83%.

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