The municipal market rallied for the third straight week as pent-up demand continued to push prices higher this week despite a burgeoning new-issue calendar.

The 20-bond index of general obligation bonds declined 10 basis points, to 6.28% from 6.38% a week ago. The 11-bond index was off nine basis points, to 6.19% from 6.28%.

The 30-year revenue bond index declined nine basis points, to 6.48% from 6.57% last week.

The daily Municipal Bond Index's average yield to maturity was down six basis points, to 6.40% from 6.46% last Thursday.

The three weekly indexes have fallen 34 to 35 basis points in the past three weeks and are at their lowest levels since Oct. 1, when the 20-bond was 6.27%, the 11-bond was 6.18%, and the revenue bond was 6.45%.

The daily index's yield to maturity has fallen 31 basis points from its most recent high of 6.71% on Oct. 28. It is also at its lowest level since Oct. 8, when it was also 6.40%.

Bond prices rose for the third straight week even though new-issue supply picked up after a two-week slowdown.

Bond sales, after averaging $4.42 billion a week between January and October, fell abruptly in the first two weeks of November, to $1.32 billion the first week and $3.82 billion in the second week. But The Bond Buyer estimated that $4.8 billion of bonds will be sold this week, not including $2.4 billion of sales scheduled on a "day-to-day" basis.

On Monday, usually a slow day in the primary market, over $700 million of debt came to market, followed by $1.6 billion on Tuesday and $2 billion on Wednesday.

Wednesday's sales included a massive $1.29 billion negotiated offering from North Carolina Municipal Power Agency No. 1, which is the year's third-largest sale to date. However, the market was able to digest the slate, and prices rose.

"There was strong demand for the [new) bonds, and municipals have been undervalued, " a market participant said.

Buyers had set a lot of money aside since October, an analyst said, and current municipal prices "gave buyers a good reason for a spending spree this week. Also, given the competitive market's scenario, it allowed for very aggressive bidding."

The analyst also noted that "government prices traded higher during the week in anticipation of a coupon pass by the Federal Reserve, which lightened supply." The Fed usually makes two permanent purchases for its own account in November to add reserves ahead of the holiday season. Such a purchase is called a "coupon pass" on the Street.

Traders estimated the Fed bought $4 billion and that it was most interested in securities maturing in seven years or more.

Tax-exempt prices continued to outperform Treasuries, as the bell-wether 30-year Treasury bond's yield fell six basis points, to 7.53% from 7.59%.

The Bond Buyer's one-year note index declined eight basis points, to 2.90% from 2.98% a week ago. It is now at its lowest level since Oct. 14, when it was 2.89%.

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