Yields on The Bond Buyer's municipal bond indexes rose this week to their highest levels in more than three years, as the demand-starved market ignored favorable news on interest rates and prices spiraled downward for the fifth consecutive week.

The 20-bond and 11-bond indexes of general obligation yields jumped 10 basis points apiece, to 7.06% and 6.94%, respectively, from 6.96% and 6.84% last Thursday.

The 20-bond index is now at its highest point since July 11, 1991, when it was 7.07%. The 11-bond index has not been higher since July 3, 1991, when it was 6.95%.

The 30-year revenue bond index jumped 14 basis points, to 7.37% yesterday from 7.23% a week ago. It is now at its highest level since Jan. 10, 1991, when it was 7.40%.

The average yield to maturity of the 40 bonds used in calculating the daily Municipal Bond Index also gained 14 basis points on the week, to 7.33% yesterday from 7.19% the previous Thursday. The yield to maturity has not been higher since March 28, 1991, when it was 7.34%.

Part of the increase in the yield to maturity can be attributed to the twice-monthly revision in the list of 40 bonds used to calculate the index. The latest revision, which took effect Wednesday, raised the average coupon rate for the 40 bonds to 6.22% from 6.11%.

Tax-exempt bond prices drifted lower throughout the week, in extremely light secondary market trading. Prices declined 1/2 point last Friday in an abbreviated Veterans Day session and idled Monday ahead of the Federal Open Market Committee's meeting the next day.

The FOMC made its long-awaited move Tuesday and raised short-term interest rates 3/4 point. However, the resulting jump in fixed-income prices proved fleeting. Traders and analysts said that the market already had built the rate increase into current prices, and that the Fed will have to raise rates yet again to spark a genuine rally.

The markets had another shot at a comeback Wednesday morning, after the Labor Department reported that the consumer price index rose only 0.1% in October. But while new issues met with some solid demand in the primary market, the secondary market remained choppy and depressed. Prices fell 1/4 to 1/2 point Wednesday and another 1/2 point yesterday.

U.S. government securities, which are not hampered by a severe lack of liquidity as municipals are, managed to eke out a slight gain this week. The yield on the bellwether 30-year Treasury bond edged down two basis points, to 8.12% yesterday from 8.14% the previous Thursday.

In the short end, The Bond Buyer's one-year note index jumped 15 basis points this week, to 4.51% on Wednesday from 4.36% the previous Wednesday. That is the highest level since Oct. 23, 1991, when the one-year index was 4.70%.

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