Yields on The Bond Buyer's indexes moved lower this week on the strength of growing demand ahead of Jan. 1's pending redemptions and coupon payments.
Despite a heavy calendar and more signs of economic recovery, the 20-bond and 11-bond indexes of general obligation bonds each decreased six basis points from Dec. 3. The 20-bond index fell to 6.22% and the 11-bond dropped to 6.13%.
The 30-year revenue bond index was also down six basis points, to 6.42% from 6.48%.
The daily Municipal Bond Index's average yield to maturity declined five basis points, to 6.36% from 6.41%.
"It is amazing, isn't it?" Robert Chamberlin, senior vice president of municipal research and marketing at Dean Witter Reynolds Inc., said of the market's ongoing strength. "It's as if the stars are all in the proper alignment."
Municipals took on a bullish tone from the Dec. 4. jobs report, which showed the national unemployment rate dropping 0.2 percentage points, to 7.2%. The tone was bolstered by other economic indicators during the week, such as the 1% decline in wholesale sales, the 0.6% decrease in inventories, the 2% fall in wholesale prices, and the Federal Reserve Board's "beige book" report, which says most regions experienced slight to moderate improvement in some or all economic sectors during late October and all of November. The reports convinced market players that while the economy is strengthening, inflation is not a worry.
"That will de-emphasize the short-term spending portion of President-elect Clinton's package and instead shift toward actual deficit reduction," a bond analysis said.
U.S. government securities significantly outperformed tax-exempts this week, as the bellwether 30-year Treasury bond's yield fell 14 basis points, to 7.41% from 7.55%.
Since the election, "the market has been moving up and away from the negatives of a Clinton administration and toward the positives," Chamberlin said. "He's shown a sensitivity to market concerns, he's taken care with is fiscal stimulus package, and there's greater respect for his knowledge of state and local financing."
There also has been greater concern about future supply. With about $15 billion in bond redemptions and coupon and principal payments duel in early January, demand has allowed the market to digest a heavy plate of new issues.
The Bond Buyer's 30-day visible supply totaled $5.1 billion yesterday, a decline of $1.6 billion from $6.7 billion last Friday. Standard & Poor Corp.'s The Blue List, which charts dealer inventories of unsold bonds, fell $260 million, to $1.54 billion yesterday from $1.8 billion last Friday.
Although sizable issues were brought to the market this week, Chamberlin said that part of this year's record volume has been driven by smaller issuers.
"It's been in everyone's interest to pursue muni borrowing," he said. "The market reached further down into the bowels of state and local levels. Crossroads towns have had the opportunity to refund some of their outstanding debt, and the market has done an outstanding job" of selling the issues of the smaller borrowers.
This year's 11,046 long-term issues -- those maturing in 13 months or more -- is already a record, surpassing the previous high of 10,939 last year.
"Have we topped out yet?" Chamberlin said. "That remains to be seen, but we haven't seen anything like this in quite some time ... There is a lot of money flowing into the market."
After hitting a record low last week, The Bond Buyer's one-year note index rose eight basis points this week, to 2.64% from 2.56% a week ago.