Yields on The Bond Buyer's weekly indexes declined modestly for the eighth consecutive week, despite the year's heaviest new-issue calendar to date.
The 20-bond index of general obligation bonds fell five basis points, to 6.94% from 6.99% and the 11-bond GO index eased four basis points, to 6.80% from 6.84%.
Over the past eight weeks, the 20-bond index has fallen 25 basis points, to its lowest level since May 9, when it was 6.93%, andd the 11-bond index has fallen 24 basis points, to its lowest level since May 16, when it was 6.77%.
The 30-year revenue bond index dropped three basis points, to 7.07% from 7.10% a week ago. The index has fallen 29 basis points in the eight weeks since June 13, and is at its lowest level since Feb. 14, when it was also 7.07%.
The yield to maturity of the 40 bonds used to calculate the daily Bond Buyer Municipal Bond Index declined four basis points, to 7.05% from 7.09% last Thursday. The yield to maturity is the lowest since March 20, 1987, when it was also 7.05%.
The municipal bond market posted modest gains in prices this week despite absorbing an estimated $3.7 billion of new issues -- a high for this year and the highest since the week of Dec. 16, 1989, when sales totaled $4.67 billion. Investor demand for tax-exempts continued to be strong; Standard & Poor's Corp.'s The Blue List of dealer inventory dropped to $980 million, down $370 million from $1.35 billion last Friday.
The U.S. government securities market outperformed municipals this week, with the Treasury's bellwether 30-year bond dropping 13 basis points in yield, to 8.23% from 8.36% a week ago.
Although government traders were optimistic, some said current prices look expensive and the market's bullish mood faces a threat today when the July producer price index will be released.
"You could get your eyeballs ripped out if that's a bad number," a trader said.
According to 14 economists surveyed by The Bond Buyer, the core rate of inflation, excluding food and energy costs, will be up 0.2%. In June, the price index was down 0.3% and the core rate showed no change, following the 0.6% rise in the index and the 0.4% increase in the core rate in May.
In the short-term market, The Bond Buyer's one-year note index dropped 25 basis points, to 4.96% from 5.21%. The note market has been very strong, and investors are flush with cash they need to put to work.