Yields of the Bond Buyer's weekly bond indexes bounced in a tight range this week, ending in a slight increase in the wake of the fixed-income markets' disappointment that the Federal Reserve Board did not ease monetary policy

The 20-bond index of general obligation yields rose two basis points, to 6.29% from 6.27% a week ago. The 11-bond GO index was also up two basis points. to 6.20% from 6.18%.

The 30-year revenue bond index returned to its level of two weeks ago, rising four basis points to 6.49% from 6.45% last week.

The daily Bond Buyer Municipal Bond Index's average yield to maturity also increased four basis points, to 6.40% from 6.36%.

Last Friday's employment report, with its 57,000 drop in nonfarm payroll jobs for September and a revised 128,000 decline in August, continued to raise expectations that the Fed would lower short-term interest rates. On Monday, U.S. Treasury prices jumped as much as 5/8 point, with municipals trailing behind, when the Dow Jones industrial average of stock prices dropped more than 100 points.

But when the Fed showed no signs of easing on Tuesday, the Treasury market started to sell off, and municipal prices fell in tandem. Governments prices continued to fall Wednesday, after a poor showing for the seven-year Treasury note auction. The bellwether 30-year bond's yield jumped 14 basis points from last week, to 7.43% from 7.29% on Oct. 1

"The market's been waiting for a Fed intervention that's just not going to happen in the short run," one trader said. "We're going to be stuck on a relative range until after the election."

Market conditions continued to cause negative arbitrage problems for the municipal market, which kept refunding issues at bay. The Bond Buyer's negotiated calendar lists 31 offerings totaling $2.44 billion that are scheduled for sale on a "day-to-day" basis -- up from 27 such issues totaling $2.02 billion last week. Refundings account for 18 of those issues, totaling $1.65 billion, up slightly from 16 issues and $1.55 billion a week ago. On Wednesday, the Massachusetts Water Resources Authority temporarily delayed pricing a $450 million refunding issue.

Meanwhile, some investors have been fleeing the stagnant long end for the short-term note sector. The Bond Buyer's one-year note index reached another record low, falling 11 basis points to 2.76% from last week's 2.87%.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.