Yields on The Bond Buyer's tax-exempt bond indexes reported modest declines for the fourth straight week as the market remained firm on favorable economic data and sound technicals.
The daily Municipal Bond Index's yield to maturity reached a record low for the second consecutive week and the weekly indexes fell to their lowest levels in five months.
The daily index's average yield to maturity fell two basis points, to 6.52% from 6.54%. This is a record low yield to maturity, which The Bond Buyer began calculating Jan. 1, 1985.
The 20-bond and 11-bond indexes of general obligation bonds each fell four basis points, to 6.42% and 6.31%, respectively, from 6.46% and 6.35% a week ago. The two indexes reached their lowest levels since Jan. 9, when they hit 12-year lows of 6.40% and 6.28%.
The 30-year revenue bond index's yield dropped four basis points, to 6.58% from 6.62%, to reach its lowest level since Jan. 9, when it reached an all-time low of 6.53%. The revenue bond index began on Sept. 20, 1979.
The U.S. governments market kept pace, as the 30-year Treasury bond's yield declined three basis points, to 7.76% from 7.79%.
In the short-term note sector, The Bond Buyer's one-year note index dropped 16 basis points, to 3.04% from 3.20% last week, matching its all-time low set on Jan. 15. The one-year index has fallen 33 basis points in the past four weeks, as investors snapped up short-term notes in preparation for the massive wave of redemptions on July 1.
The municipal market spent most of the week in a tight range, with secondary prices bolstered by strong demand for new issues. Secondary trading was light early in the week as most participants waited for the results of the Treasury's sales of $15 billion two-year notes Tuesday and $11 billion five-year notes Wednesday. Both auctions were described as "well-bid."
Treasury and municipal prices rose slightly Wednesday, following the report that durable goods orders fell 2.4% in May. Economists had expected a 0.8% increase.
"The [new-issue] supply has not been overwhelming, and the [durable goods orders] data ... has been an added boost," said a municipal trader. "There hasn't been that much going on, but the market is in real good technical shape."
The Bond Buyer's 30-day visible supply was at $2.25 billion, its lowest level since Dec. 31, 1991. Standard & Poor Corp.'s The Blue List was at $1.25 billion.
Kevin Flanagan, a money market economist at Dean Witter Reynolds Inc., said the durable goods data "calls into question the vigor of the recovery" because it is a leading indicator and showed weakness across the board.
That opinion was bolstered Thursday morning when the National Association of Realtors said sales of existing single-family homes fell 1.7% in May, and the Labor Department said new claims for state unemployment insurance benefits rose 16,000 in the week ended June 13.
"This morning's number [unemployment claims] and yesterday's durable goods number really are increasing the odds the Fed will decide to ease policy at next week's meeting," said Paul Lally, an economist at R.H. Wrightson & Associates. "The political pressure is intense, inflation seems to be on the back burner, and there's little to lose with another small ease."