A second straight week of positive economic indicators accelerated the flight of buyers from the municipal bond market, propelling yields on

The Bond Buyer's weekly indexes to their highest levels in three months. The 20-bond index of general obligation bond yields jumped 14 basis points this week, to 5.45% from 5.31%, while the 11-bond index climbed 13 basis points, to 5.34% from 5.21% last Thursday. Those were the highest levels for the GO indexes since Aug. 12, when the 20-bond was 5.45% and the 11-bond was 5.36%.

The 30-year revenue bond index spiraled upward by 16 basis points, to 5.72% from 5.56% last Thursday. The revenue bond index has not been higher since Aug. 5, when it was 5.83%.

The average yield to maturity of the 40 bonds used to calculate the daily Municipal Bond Index increased 13 basis points, to 5.61% from 5.48% a week ago.

U.S. Treasury prices took an even worse beating, as the government market struggled with stronger economic indicators and the Treasury's quarterly refunding announcement. The yield on the bellwether 30-year bond vaulted 24 basis points, to 6.19% from 5.95% on Oct. 28.

"This market has really been taking a shellacking," a market analyst said. "It's been a combination of strong economic indicators going into the fourth quarter, a negative retail environment, a technical breakdown in market levels, mutual fund redemptions, and hefty dealer inventory. They've all led to further backup in municipal prices."

On Monday, the National Association of Purchasing Management said its index of the nation's manufacturing sector jumped in October to 53.8% from 49.7% in September, well above the 51.2% level that most economists had expected. It was the first time since May that the index scored above 50% - a reading that indicates that the economy is generally expanding.

On Tuesday, the Commerce Department reported that the index of leading economic indicators rose 0.5% in September. The next day Commerce reported that sales of single-family homes increased 20.8% in September -- the largest gain since September 1986 -- to a seasonally adjusted annual rate of 762,000 units.

The market continued to feel the pressure on prices that results from new-issue sales remaining at high levels. Weekly new-issue sales have exceeded $5 billion since the week ended Sept. 10.

The supply pressure, however, may be easing slightly. The Bond Buyer's 30-day visible supply dropped to $3.61 billion yesterday, down $1.73 billion from last Friday's $5.34 billion and the lowest level since Sept. 16.

Secondary supply also has remained stubbornly high. Standard & Poor's The Blue List slid below the $2-billion mark yesterday for only the second time in the past eight business days. This measure of dealer inventory has been below $1.5 billion only once since Sept. 21, when it hit $1.42 billion on Oct. 19.

The short-end moved in the opposite direction of the long-end, as The Bond Buyer's one-year note index fell one basis point this week, to 2.75% from 2.76%.

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