Yields on The Bond Buyer's weekly bond indexes declined for the second week in a row as favorable economic news allowed the market to continue correcting itself from its collapse two weeks ago.
The 20-bond index of general obligation yields decreased eight basis points, to 6.16% from 6.24% last week, while the 11-bond general obligation index declined nine basis points, to 6.07% from 6.16% a week ago. The 30-year revenue bond index was down seven basis points, to 6.31% from 6.38% last week.
The Bond Buyer yesterday revised the list of general obligation issuers used to compile the 20-bond and 11 - bond indexes. Phoenix was added to the 20-bond index in place of Nassau County, N.Y., because traders said Nassau County rarely comes to market without some form of bond insurance. In addition, Phoenix replaced New York State in the 11-bond index so the higher-grade index could maintain its average rating of Aal.
The daily, Municipal Bond Index's average yield to maturity fell seven basis points, to 6.23% from 6.30%.
Municipals were outperformed by governments as the Treasury's bellwether 30-year bond's yield declined 14 basis points, to 7.22% from 7.36%, from Sept. 3. On Tuesday, the 30-year bond closed at 7.21%, its lowest level since August 1986 when it hit 7.12%.
Both municipal and government prices started soaring last Friday after the Labor Department reported that August's non-farm payrolls dropped by 83,000. Economists had expected a 175,000 increase.
At the same time, July's increase in employment was revised down to 177,000 from the 198,000 reported last month.
"This is not a good picture for the economy or the job market," Michael Niemira, business economist at Mitsubishi Bank said last Friday. "What you see in the totals is confirmed by all the details - weak, weak, weak."
Due to the jobless data, many market watchers expected the Federal Reserve Board to ease interest rates again.
However, Brian Fabbri, chief economist at Midland Montagu, said last Friday that even though the report was "pathetic," the Fed would not ease immediately because of the dollar's weakness.
The Fed did ease the funds rate to 3%, which fucled last Friday's price rise. But after Labor Day, the market ran into supply pressures that kept a lid on the market's upswing.
"The visible supply jumped and everybody is afraid of that, as they should be," one trader said. "The buyers are in control again, and new deals will have to be priced to go.
On Tuesday, The Bond Buyer's 30-day visible supply was at $6.31 billion, $1.06 billion higher than last Thursday.
By Wednesday, with another $1.7 billion ready for market, traders worried that underwriters would price other deals too aggressively and buyers would step away.
"People are wishing this market up," a trader said.
By early yesterday, the market's tone softened, and market players were ready to take prices lower.
"It seems like it might be ready to head south," a trader said. "The boys are poised, and some dollar bonds lost some ground."
In the short-term sector, The Bond Buyer's one-year note index plunged 24 basis points, to 2.97% from last week's 3.21%.