Yields of The Bond Buyer's weekly bond indexes posted sharp increases this week and hit their highest levels in four months, as prices continued to take a beating from heavy supply and a jittery U.S. Treasury market.
The 20-bond index of general obligation yields jumped 19 basis points, to 6.53% from 6.34% last week, and the II -bond index rose 17 basis points, to 6.42% from 6.25%.
The 30-year revenue bond index was up 20 basis points, to 6.71% from 6.51% last week.
The indexes have not been near these levels since June 4, when the 20-bond index was 6.57%, the 11-bond index was 6.45%, and the revenue index was 6.73%. Since July 30, when the GO indexes hit 14-year lows and the revenue bond index posted an all-time low, the 20-bond index has risen 64 basis points, the 11-bond index 62 basis points, and the revenue index 59 basis points.
The daily Bond Buyer Municipal Bond Index's average yield to maturity rose 15 basis points, to 6.58% from 6.43%. It is now at its highest level since June 15, when it was 6.59%.
The weight of this year's unprecedented new-issue supply has caught up with the market and has been driving municipal prices down for the past three weeks. As of Wednesday, state and local issuers have sold $229 billion of bonds and notes this year. That already exceeds the previous record of $228.8 billion, set in 1985. Since Sept. 10, The Bond Buyer's 30-day visible supply has not been below $6 billion, and weekly sales have not been under $3.5 billion.
New-issue supply also has bloated dealer inventories. Standard & Poor Corp.'s The Blue List, which charts dealer inventories of unsold bonds, totaled $1.87 billion yesterday. The last time The Blue List was near that level was March 20, when it was $1.88 billion, and it is close to its high for the year, $2.13 billion, set on March 17.
Tax-exempt prices were also battered by U.S. government market jitters over any fiscal stimulus package that Gov. Bill Clinton of Arkansas might offer if he becomes President.
Treasury bond prices dropped sharply early in the week, taking municipals with them, after a story in the Los Angeles Times suggested that a Clinton administration would offer up an even more aggressive fiscal stimulus package than had been proposed.
"Bill Clinton is the bottom line" for price drops, one trader said. "The realization that Clinton will become President with a Congress that will give him anything he winks at has sunk into the market. "
Treasuries posted a technical rebound on Wednesday, erasing some of the week's losses, and the bellwether 30-year bond yield rose only nine basis points on the week, to 7.59% from 7.50%. Municipals did not follow Treasuries higher and continued to lose ground.
Yields have been under upward pressure" as Clinton has held onto his double-digit lead over George Bush, an economist said.
The "Clinton willies," as the market has termed the effect, was a factor in Tuesday's pricing of $1.04 billion of New York City bonds. A 26-member syndicate led by Lehman Brothers had to reprice $759 million of general obligation bonds and raise yields five basis points to entice wary investors.
The Bond Buyer's one-year note index rose eight basis points, to 2.97% from last week's 2.89%.