Buy side

All The Bond Buyer's weekly yield indexes increased this week, and the one-year note index rose 107 basis points, the largest one-week index since it began in July 1989.

For the first week since the beginning of the year, tax-free money market funds saw outflows with a $10.41 billion decline for the week ending Feb. 18, causing assets to drop to $481.64 billion, down from the prior week's high of $492.05 billion, according to the Money Fund Report from imoneynet.com.

Weekly reporting municipal bond mutual funds had a net inflow of $383 million during the period ending Feb. 13, AMG Data Services reported.

There will be few sizable deals for investors to choose from in an abbreviated trading session this week due to the observance of the Presidents Day holiday, as $2.42 billion of expected new-issue volume will come to market after last week's revised total of $4.40 billion.

Tax-free money market funds inflows were down from last week's huge haul, but still totaled $2.124 billion, boosting assets to $492.05 billion for the week ending Feb. 12, according to imoneynet.com.

Nearly all of The Bond Buyer's weekly yield indexes increased this week, as uncertainty in the auction-rate market helped push yields higher through the latter part of the week.

Eleven of the market's largest tender option bond programs have approached Moody's Investors Service with plans to update the documents defining their programs so the underlying ratings of insured bonds are taken into account.

Weekly reporting municipal bond mutual funds had a net inflow of $563 million during the period ending Feb. 6, AMG Data Services reported.

New York's Metropolitan Transportation Authority and New York City will share the spotlight in the Empire State, teaming up to bring over $1.1 billion of supply to the new-issue market this week as overall volume is expected to reach $3.9 billion, significantly down from last week's revised $17.7 billion total.

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.

A generous $6.67 billion of assets flowed into tax-free money market funds for the week ending Feb. 4, according to the Money Fund Report.

With ongoing problems in the bond insurance market, large institutional investors say they continue to find value on A-rated bonds - with insurance - in the secondary market now that spreads between generic triple-A and single-A paper have widened by approximately 30 basis points versus where they were before the subprime mortgage crisis unfolded over eight months ago.

Current problems in the credit markets are now undercutting the short-term municipal market, as rising yields in variable-rate demand notes and auction rates and a handful of failed auctions show a market reeling from credit concerns and no longer protected by staunch triple-A rated bond insurance.

A $3.2 billion sale of economic recovery bonds by California will test the choppy waters of the municipal market this week, headlining an estimated $6.18 billion slate of new-issue volume in the primary market.

Weekly reporting municipal bond mutual funds had a net inflow of $468 million during the period ending Jan. 30, AMG Data Services reported.

Financial Guaranty Insurance Co. was downgraded by Standard & Poor’s yesterday to AA from AAA, based on the rating agency’s most recent downg ades of residential mortgage-backed securities, some of which are guaranteed by FGIC. The insurer remains on credit watch with developing implications.

Following the Federal Open Market Committee’s surprise cut in the federal funds rate by 75 basis points to 3.50% on Jan. 22, tax-free money market funds ended the first month of 2008 on a positive note, reporting inflows of $939.5 million for the week ending Jan. 29, according to the Money Fund Report.

The turmoil in the municipal market over bond insurers’ exposure to ill-fated products derived from subprime mortgages has continued, with recent downgrades of monoline insurers suffering from severe financial deficiencies. In addition, Democratic leaders are proposing federal oversight and uniform standards for insurers, and the affected guarantors are being closely scrutinized by the Senate Banking Committee and Treasury Secretary Henry Paulson.

In the absence of any billion-dollar deals this week, a handful of significantly smaller financings will be priced into a relatively quiet primary market where an estimated $3.29 billion in new issues is expected. The volume compares to last week when a revised $3.45 billion in total competitive and negotiated new issues came to market, according to Thomson Financial.

Weekly reporting municipal bond mutual funds had a net inflow of $513 million during the period ending Jan. 23, AMG Data Services reported.