Buy side

Most of The Bond Buyer's weekly yield indexes pushed higher this week, as tax-exempts grew weaker in all the week's sessions despite light to moderate activity and Treasury market gains.

There will be few deals in the primary market for investors to digest this week as many issues will be put on hold until after the Thanksgiving holiday. The result will be a drop in volume to an estimated $2.25 billion after reaching as high as $5.09 billion last week - the strongest in several weeks after supply gradually inched its way up amid the nation's ongoing fiscal recovery effort, according to data from Thomson Reuters.

Withdrawals from municipal bond mutual funds accelerated last week as the financial crisis sapped demand for almost every investment except Treasuries.

Nearly all The Bond Buyer's weekly yield indexes were somewhat lower this week on the whole, as municipals showed gains but lagged behind a massive Treasury rally.

After a one-week blip that showed some positive growth last week - following two prior weeks of outflow activity - tax-exempt money market funds returned to negative territory, losing $4.11 billion and settling with total assets of $492.47 billion for the week ending Nov. 17, according to the Money Fund Report.

Municipal bond exchange- traded funds have suffered a baptism by fire in their first year of existence.

A pair of deals from issuers in Massachusetts and California will headline this week's primary market, where an estimated $4.32 billion is expected to offer the largest - and most notable - increase in new-issue volume since the recent economic turmoil that put the municipal market in a deep freeze over the last six to eight weeks.

The exodus of cash from municipal bond mutual funds appeared to slow last week.

The Bond Buyer's weekly yield indexes declined this week, as tax-exempt yields fell in each of the holiday-shortened week's sessions.

With November well under way and the presidential election over, tax-free mutual funds saw inflows for the week ended Nov. 10, drawing in $1.59 billion and ending the week with $496.58 billion in total assets, according to the Money Fund Report.

Amid continued strong demand and recent firmness that saw some yields decline as much as 12 basis points in spots during new-issue pricing last week, a $750 million revenue offering from the New Jersey Transportation Trust Fund Authority will further test the strength of the market this week.

Weekly reporting municipal bond mutual funds had a net outflow of $253 million during the period ending Nov. 5, AMG Data Services reported.

WASHINGTON - The Treasury Department's plans to issue more than $1 trillion in Treasury securities in fiscal 2009 to help raise revenues for the financial rescue plan are likely to further the recent pronounced move of municipal bond yields above Treasury yields, market participants say.

The Bond Buyer's weekly yield indexes mostly declined this week, as Treasury market gains carried municipals to a decidedly positive string of sessions.

For the second week in a row, tax-exempt money market funds saw outflows - albeit slightly less than last week - as they closed the books on October and digested a 50 basis point interest rate cut by the Federal Open Market Committee.

Goldman Sachs Asset Management LP plans to launch a new municipal closed-end fund as part of its existing lineup of tax-exempt mutual funds, according to an Oct. 24 registration with the Securities and Exchange Commission. The addition, which is to be called the Goldman Sachs Municipal Opportunity Fund, will bring the firm's number of tax-free mutual funds to six.

As a result of the credit crisis, Valley Forge, Pa.-based Vanguard Group yesterday said it will merge its $3.2 billion Vanguard Insured Long-Term Tax-Exempt Fund into its $2.8 billion Vanguard Long-Term Tax-Exempt Fund effective Dec. 12, 2008.

Weekly reporting municipal bond mutual funds had a net outflow of $134 million during the period ending Oct. 29, AMG Data Services reported.

The municipal market will see a slight decline in new-issue volume this week as some issues remain postponed due to unsettled market conditions, and as some issuers await the Election Day outcome of an estimated $66 billion of bond referendums before proceeding with their deals.

WASHINGTON - Disruption in the short-term market, failed remarketings of variable-rate bonds, and the credit deterioration of counterparties, combined with the U.S. housing market's woes, pose challenges in the coming months for state housing finance agencies, Moody's Investors Service said in a report released Friday.