After resisting the pressure from last week's Treasury price drop-off, the municipal market gave in to copious levels of upcominG supply, driving yields on The Bond Buyer's weekly yields higher.

The 20-bond index of general obligation bonds rose eight basis points, to 5.77% from 5.69% last Thursday.

The GO bond indexes are at their highest levels since April 7, when the 20-bond was at 5.84% and the 11-bond was 5.73%.

The 11-bond index increased nine basis points, to 5.68% from 5.59%.

The 30-year revenue bond index was up seven basis points, to 5.97% from last week's 5.90%.

The average yield to maturity of the 40 bonds used to calculate the daily Municipal Bond Index, which consists mostly of revenue bonds, climbed five basis points, to 5.91% from 5.86% last Thursday.

Last week, municipal prices held their own in the face of a sell-off in the government market that was fueled by inflation fears. However, as the government market continued to be hit this week with price declines and munis faced another ponderous calendar of new-issue supply, tax-exempt yields started rising with Treasuries.

On Tuesday, the bellwether 30-year bond closed at 7.02%, its highest close in six weeks.

"Both municipals and Treasuries sold off this week," a bond trader said "but the harder muni volume," drove municipal prices down further.

The Bond Buyer's 30-day visible supply hit $9.49 billion on Tuesday, its highest level since March 24 when it reached $9.91 billion.

Standard & Poor Corp.'s Blue List, which catalogs dealers' inventories of unsold bonds, was at $1.64 billion yesterday, an increase of $280 million from last Friday's $1.36 billion.

"Supply this week was immense," said George Fischer, a portfolio manager with Fidelity Investments. "I'm surprised they cheapened only by that much."

The U.S. Treasury market "rallied back, but munis lagged due to the large amount of prospective issuance," the trader said.

The 30-year bond was at 6.98% yesterday, up four basis points from last week's 6.94%.

"The fixed-income markets were worried about inflation from last week's consumer and producer price indexes," Fischer said, as well as from a rally in gold prices. Gold prices had jumped to $376 an ounce by Tuesday, an $8 rise from Monday. However, "Just when everyone thought gold would tank munis, gold itself was tanked."

"Treasuries are a little skittish in the short term," Fischer continued, "but they're not in bad shape in the long term ... This municipal supply will not go on indefinitely. At the point of that reversal, munis will be priced very cheaply to Treasuries. This is the time to load up on munis."

The Bond Buyer's one-year note index rose six basis points in yield from a week ago, to 2.62% from 2.56%.

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