A resurgence of supply, hints of a reviving economy, and brief worries about Russia pushed yields on The Bond Buyer's indexes slightly higher this week.
The yield on the 20-bond index of general obligation bonds rose three basis points from last week, to 5.30% from 5.27%. The 11-bond index was up two basis points, to 5.20% from 5.18% last Thursday.
The 30-year revenue bond index gained two basis points, to 5.51% from 5.49% last Thursday.
The average yield to maturity of the 40 bonds used to calculate the daily Municipal Bond Index rose two basis points, to 5.47% from 5.45%. The 40-bond index is comprised primarily of revenue bonds.
"I think we can attribute all of this to the Boris blowoff," a portfolio manager said. "People thought Yeltsin was in trouble. They rushed to sell bonds. But it turns out he wasn't in trouble at all. Bonds have taken back most of what they lost."
After a quick lurch lower, the yield on the Treasury's bellwether 30-year bond closed at 6.11% Tuesday, but retraced its steps Wednesday and yesterday to reach 6.05% - six basis points higher on the week - at 3:30 p.m., eastern daylight time, yesterday.
"Supply pressures played a role for the rise in yields this week," a bond trader said. "Although the forward supply calendar was not comprised of that many major issues those in the $100 million to $150 million range - there was a wide variety of $50 million to $90 million deals brought into the market.
"Those deals, in turn, were priced at what should have been attractive to sell in the market which should have allowed dealers to move on to the next issue."
However, buyers were not cooperating fully with that scenario. Market participants said investors were shying away from new issues because a growing future calendar allowed them to be pickier. Higher prices were also playing a role.
That pushed the backlog of municipal bonds steadily higher. Standard & Poor's Corp.'s The Blue List rose $8 million Thursday, to $1.84 billion. The Blue List now has risen 10 consecutive business days, during which it has more than doubled from its $874 million level on Sept. 9. It is now at its highest level since Aug. 5 when it was $1.86 billion.
The Bond Buyer's 30-day visible supply began the week at $6.7 billion, a $1.4 billion jump from last Friday. It was the first time it had exceeded $6 billion since Aug. 24 and was at its highest level since Aug. 4, when it was $6.87 billion.
"On the fundamental side," the trader said, "stronger-than-expected housing starts and relatively strong car sales has kept the inflation specter spooking the market. "
The Commerce Department reported Tuesday that housing starts increased 7.8% in August, to a seasonally adjusted annual rate of 13 million units, the largest monthly climb since August 1992.
"There's been a weak tone for the past couple of weeks," the manager said. "But this has been nothing more than a healthy correction in a bull market. And the bull market will continue."
The Bond Buyer's one-year note index climbed 12 basis points this week, to 2.92% from 2.80% a week ago. The short-term index has jumped 23 basis points in the past two weeks and is now at its highest level since Aug. 11, when it was 2.97%.
