Inflationary fears and light supply kept municipal prices in a tight range and left The Bond Buyer's yield indexes virtually unchanged from a week ago.

The average yield to maturity of the 40 bonds used to calculate the daily Municipal Bond Index slipped one basis point, to 5.71% from 5.72% on July 1. It was the lowest yield to maturity for the index's bonds since The Bond Buyer began calculating it in January 1985.

The 20-bond and 11-bond indexes were unchanged from a week ago at 5.55% and 5.45% respectively. The 30-year revenue bond index edged one basis point higher, to 5.76% from 5.75% last week.

"We were basically just treading water," a market analyst said. "Inflationary fears in the beginning of the week held back Treasuries, and with supply relatively light, there just wasn't anything to move the market except for rumors."

Anticipated bond sales for this week was a meager $ 3 billion. If that estimate bears out, it would be the lowest weekly volume since April 5-9, when sales totaled $ 2.33 billion, according to Securities Data Co. Through July 2, weekly sales volume this year has averaged $ 5.65 billion.

"After all the movement in June and buying in anticipation of July [redemptions and coupon payments], there was bound to be a flat period and even a pullback over perhaps the next couple of weeks," said George Fischer, a portfolio manager with Fidelity investments.

"It was a quiet week," a bond trader said. "Although the deals were well received, the market was without anything to cause any significant movement. Some people are waiting for reinvestment from July [calls], but it seems that July has been a bit of a bust. A lot has already been invested from the July redemptions ... The bid has been firm, but not aggressive."

"I would expect to see some movement next week," the analyst said. "Supply will be much more substantial, and I expect money to start moving in from the mutual funds. "

The Bond Buyer's 30-day visible supply, a near-term indicator of what dealers will be able to offer investors, spent the week under the $ 5 billion level. But some sizable offerings were added to the new-issue calendar yesterday. including $ 247 million of Los Angeles various improvement bonds on the competitive side and a negotiated $ 806 million offering of new-money and refunding bonds by the Puerto Rico Highway and Transportation Authority. Those deals pushed the 30-day visible supply up to $ 6.59 billion -- the highest level since June 14.

"There's just too much money chasing bonds worldwide for these yields to hold," Fischer said. "With the world economy weak, inflation stable, and no indications of central banks tightening, we have plenty of room for yields in munis and other bond markets to continue moving lower. "

The Bond Buyer's one-year note index rose six basis points in yield, to 2.63% from 2.57% a week ago.

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.