Yesterday's improvement in market sentiment helped lift an otherwise break-even week for municipal bonds, pushing yields five basis points lower on each of The Bond Buyer's weekly market indexes.
The moves put the 20-bond index of general obligation bonds at 6.22%, compared with 6.27% a week earlier. The 11-bond index fell to 6.14% from 6.19%.
The five-basis point fall in the revenue bond index brought the yield on the indicator to 6.47% yesterday, from 6.52% a week earlier.
The average yield to maturity of the 40 bonds used to calculate the daily Municipal Bond Index was unchanged from last week at 6.44%, but fell six basis points from Wednesday's 6.50% level.
The municipal market's performance exactly matched the Treasury market's showing for the week. The 30-year government bond fell five basis points for the week, to yield 7.52%.
Analysts said much of the market's improved tone came yesterday, when favorable economic indicators and a stronger U.S. dollar helped convince many investors that the Federal Reserve might not tighten monetary policy as quickly as analysts had feared earlier this month.
A weaker-than-expected June retail sales report and a larger-than-anticipated jump in weekly jobless claims acted as the market spark yesterday.
Retail sales in June rose 0.6% while May retail sales were revised to show a fall of 0.4% rather than 0.2%.
An increase of 19,000 initial claims for state unemployment insurance in the week ended July 9 lent additional support to the market. The increase exceeded analysts' expectations.
Both reports helped ease fears of strong economic growth fueled in part by last Friday's extremely strong June employment report.
Market sources say an additional force helping to improve the tone in recent days has been a slowdown in supply pressures.
Standard & Poor's Corp.'s the Blue List, a key measure of dealers' unsold inventory, continued to decline steadily from the seven-year high it set on June 23.
In the past three weeks, the Blue List has shrunk by $640 million, or 27%, from $2.34 billion on June 23 to $1.7 billion yesterday. Since last Thursday, the list has fallen $150 million, or 8%.
Meanwhile, the 30-day visible supply of new issues, which last week dropped to its lowest levels since September 1993, posted a substantial increase this week.
Visible supply jumped to a 1994 high of $7.89 billion Tuesday before easing to $7.47 billion yesterday.
That figure includes a $4 billion offering of 21-month California warrants, but even if the $4 billion sale is excluded, the visible supply has returned to the levels seen for the week ended June 24.