An unexpected billion dollar boost in supply kept a lid on municipal prices this week, and yields on The Bond Buyer's weekly indexes were little changed from a week ago.
However, a sudden erosion in the customer base sent a shudder through the market yesterday afternoon, causing prices to tumble.
The yield on the 20-bond index of general obligations was unchanged from a week ago at 5.20%. This is the fourth time since Sept. 2 that the 20-bond index was unchanged from the previous week.
The 11-bond index slipped one basis point, to 5.10% from 5.11%.
The 20-bound index remains at its lowest level since Feb. 14, 1974, when it was at 5.18%. The 11-bound index is at its lowest level since Feb. 21, 1974, when it was 5.09%.
The 30-year revenue bond index, reflecting the late drop in bond prices, rose three basis points to 5.44% from 5.41%.
The average yield to maturity of the 40 bonds used to calculate the daily Municipal Bond Index was also up three basis points, to 5.38% from 5.35% a week ago.
Government prices took an even larger hit, as the Treasury's bellwether 30-year bond rose eight basis points to 5.92% from 5.84% Oct. 14.
"Supply kept the market in limbo for most of the week," a market analyst said. "The $425 million Floridas and $572 million Hawaiis were unexpected in the beginning of the week. But the market didn't have much of a reaction to this week's economic news, which was all biased to the stronger side.
"September housing starts reinforced the belief that that sector is leading the economy up," the analyst continued. "And the Philadelphia Fed index showed manufacturing is improving and, for the first time, that the employment component is on an upward tick."
On Tuesday, the U.S. government reported that September housing starts were up 2.8% to a seasonally adjusted annual rate of 1.35 million units. The gain put housing starts at their highest level since February 1990.
Meanwhile, several records in volume issuance are on the verge of being broken within the next week. According to figures from Securities Data Co., long-term bond volume through Wednesday was at $233.64 billion, only $1.35 billion less than the all-time high set in all of 1992 of $2.34.99 billion.
Long-term revenue bond issuance has already set a record, reaching $158.03 billion compared with $154.63 billion for 1992.
Refunding and insured bond volume are also at record highs. Refundings have hit $146.37 billion through Sept. 30, crushing 1992's record of $122.21 billion, and insured volume comes in at $83.31 billion compared to $69.08 billion for 1992.
Competitive deals continue to be the dominant portion of future supply. The competitive portion of The Bond Buyer's 30-day visible supply reached $3.96 billion on Tuesday, the highest level since Feb. 10, 1992, when it was at $3.97 billion.
Future competitive supply has exceeded expected negotiated supply for six consecutive business days. Through October, competitive supply has accounted for 48% of 30-day visible supply. That compares with 39% in August and September and 30% for the January-July period.
The one-year note index, which was calculated Wednesday, was unchanged at 2.75%.