Yields on The Bond Buyer indexes rose slightly over the past week, as bonds trended down slowly but surely throughout the holiday-shortened period.
The yield on the 20-bond index of general obligation debt rose two basis points to 6.18% from 6.16% the previous Thursday. The yield on the 11-bond GO index rose one basis point to 6.10% from 6.09% last week. The revenue bond index was up three basis points to 6.46% from 6.43% last week.
The average yield-to-maturity of the 40 bonds used in the daily Municipal Bond Index rose four basis points to 6.38% from 6.34% one week ago.
The tax-exempt market outperformed the Treasury market, however, as the yield on the benchmark 30-year bond rose 12 basis points to 7.57% from 7.45% one week ago. The yield on the Treasury's 10-year note rose 11 points to 7.27% from 7.16% one week earlier.
Tax-exempts' edge was also visible in the December MOB spread. The MOB contracted 15 basis points to negative 382 from negative 397 one week earlier.
The municipal market got off to a quick positive start last Friday, as the Labor Department reported a smaller than expected rate of job growth for August. But by afternoon, the market gave up all its gains and headed into negative territory.
Earlier this week, the market continued to slip with little economic news and continued weakness in the dollar.
Relative to the Treasury market, the tax-exempt market has been propped up by the lack of supply over the summer. The Bond Buyer 30-day visible supply totaled $1.88 billion yesterday, up slightly from $1.6 billion one week ago. Last week's level was the lowest amount of visible supply since Dec. 30, 1991.
So, analysts warned, a burst of newissue activity later this month could hurt secondary market prices.
Traders and investors expressed fear of further weakness to come.
"I'm just beat up and bewildered," one trader said yesterday.
Today, the market could get a surprise as the Labor Department reports on the producer price index for August.
A bad inflation report could jolt the Treasury market out of its recent range.
The tax-exempt yield curve steepened during the week. While yields on long-dated maturities rose, yields at the short end posted slight declines.
The yield on The Bond Buyer one-year note index fell two basis points to 3.99% from 4.01% one week ago. The decline followed a four-point drop the previous week.
In the futures market, the December municipal bond contract dropped nearly a point over the week to 89 1/2 from 90 3/8 one week earlier.