The Bond Buyer's weekly indexes were down slightly as the municipal bond market's mood moved from positive on the Federal Reserve Board's tightening to negative on yesterday's drop in the dollar.
The 20-bond index of general obligation yields was down three bails points to 6.22% from 6.25% a week ago. The 11-bond index was off two basis points to 6.14% from 6.16% the previous Thursday.
The revenue bond index declined four basis points to 6.45% from 6.49% a week earlier.
The average yield to maturity of the 40 bonds used in the daily Municipal- Bond Index, most of which are revenue bonds, fell six basis points, to 6.38% yesterday from 6.44% the previous Thursday.
The Treasury's bellwether 30year bond fell 16 basis points to 7.49% from 7.65% a week earlier. However, the government market took a pounding yesterday on the dollar's drop.
"That's very troubling if you're getting ready for next week's Treasury auction of twos and fives." a market analyst said.
"If you had asked me Wednesday, I would have said the market is down about 10 basis points," said a trader with a major New York City-based firm. "But we just gave that all back" yesterday.
"The municipal market is having sympathy pains for the foreign exchange market," a municipal market analyst said yesterday. "The market rallied on the Fed tightening, but this morning the technicals fell apart when the Bundesbank didn't lower its short-term rates."
"It's time to sit back and try to digest what's been happening today," another trader said.
After spending yesterday morning wrestling with a large number of bid lists, market players tried to size up holdings and the market's direction. Several participates said they felt tax-exempts are still in relatively good shape, despite the beating the dollar and long bond have taken. With supply remaining light, they feel that there will still be demand in the future. The Bond Buyer's 30-day visible supply yesterday was off $170 million, to $4.27 billion from $4.44 billion on Wednesday. However. the competitive component continues to swell. Competitive future supply rose $90 million yesterday to $2.82 billion.
Since Monday, competitive supply has jumped $420 million and is at its highest level since July 20 when it rose to $5.9 billion primarily on California's intent to issue $4 billion of warrants.
The negotiated sector has dwindled to $1.44 billion, down $270 million from Wednesday's $1.71 billion. Since Monday, negotiated future supply has decreased $360 million.
The 30-day visible supply has been under $5 billion 21 straight days and on 97 occasions this year. In all of 1993, the figure was under $5 billion 78 times. "We're driven by the dollar and Treasuries," a third trader said. "Munis are in pretty good technical shape, but we need govies to do better."
