Yields on The Bond Buyer's weekly indexes all fell this week, as prices rose in anticipation of the massive amount of cash expected to pour into the market from bonds being called yesterday.
The gains were stifled somewhat by uncertainty over today's release of employment statistics for June.
The average yield to maturity of the 40 bonds used to calculate the daily Municipal Bond Index dropped five basis points, to 5.72% from 5.77% last Thursday.
The index stands at its lowest yield to maturity since The Bond Buyer began calculating the 40-bond index in January 1985.
The 20-bond and 11-bond indexes each declined two basis points, to 5.55% and 5.45% respectively from 5.57% and 5.47%. The 30-year revenue bond index slid four basis points to 5.75% from 5.79% last week.
The three weekly indexes have not been lower since March 4, when the 20-bond index was 5.47%. the 11-bond index was 5.37%. and the revenue bond was 5.69%.
The March 4 yields were the lowest for the 20-bond since December 1977, the lowest for the 11-bond since March 1978, and the lowest for the revenue bond index since it began in September 1979.
The huge amount of cash entering the market this month is accounting for much of the price increases, according to market sources. They expect the money from the calls will be reinvested in the tax-exempt market, boosting demand in the coming weeks.
About $10.4 billion of bonds were expected to be called yesterday, according to The Bond Buyer's Muni-View database, and $9.2 billion were scheduled to mature. In addition, $20 billion of coupon payments were expected.
The Bond Buyer's one-year note index was unchanged at 2.57%.
The U.S. Treasury market also posted solid gains last week, with the long bond falling five basis points on the week to 6.68%.
Prices on fixed-income investments have been helped recently by economic statistics showing that economic growth remains weak, inflation is under control, and the Federal Reserve is not likely to raise short-term interest rates.
Another factor supporting the markets has been the expectation that today's employment number will be favorable. The Bond Buyer's survey of 25 economists shows an average forecast of a 130,000 increase in payrolls. The May figure was a 209,000 gain.
Next week is expected to feature a few large offerings, but supply is not expected to be a problem weighing on prices.
The Bond Buyer calculated 30-day visible supply at $3.8 billion. Secondary supply has increased slightly over the past two sessions, but has also been generally declining. The Blue List of dealer inventory rose $44.8 million, to $1.63 billion yesterday.