Yields on all of The Bond Buyer's indexes dropped slightly this week, pushing the 20-bond general obligation bond index and the 30-year revenue bond index to their lowest levels in more than four years, following the Federal Reserve Board's discount rate cut.

The average yield to maturity of the 40 bonds used in the Municipal Bond Index set an all-time low for the second straight week.

The 20-bond and 11-bond GO indexes both declined three basis points, to 6.78% and 6.65%, respectively, from 6.81% and 6.68% a week ago. Both indexes have now declined in 13 of the past 14 weeks, pushing the 20-bond index to its lowest level since March 19, 1987, when it was 6.68%. The 11-bond index is at its lowest point since Feb. 14 of this year, when it hit the 1991 low of 6.63%.

The 30-year revenue bond index dropped five basis points this week, to 6.95% from 7.00%. The revenue bond index has not been lower since Marh 5, 1987, when it reached its all-time low of 6.92%.

The Municipal Bond Index's average yield to maturity fell two basis points this week, to 6.92% from 6.94% a week ago. The yield is the lowest ever since The Bond Buyer began calculating it in January 1985.

When the Fed cut the discount rate to 5% from 5 1/2% last Friday, tax-exempt prices rose 1/4 to 3/8 point. After that, however, prices remained fairly strady for the rest of the week, confounding initial expectations that the lower discount rate would lead to more price gains.

"Most of the Fed's ease is already built into the market," one New York-based trader said. "But if the market goes to long without some more good news it will start selling off."

"Everybody is bullish and have been for a while and they've been right," another New York trader said. "It's going to take a serious reversal in economic news to change the market, but we're still susceptible to little blips and dips. On the whole, municipals continue to get creepy better."

Municipals performed on an even level with the U.S. Treasury market. The Treasury's bellwether 30-year bond was down four basis points in yield during the week, to 7.91% from 7.95% last Thursday.

Jan Hurley, a senior market analyst at Cahse Municipal Securities Inc., said it is still too early to know whether the Federal Reserve is finished easing for the year.

"I come out on the side that it's more likely that we will see lower rates," Ms. Hurley said. "But I do think the Fed will stay at these levels for 30 to 60 days, so you're going to need new fuel to keep the rally going."

In tyhe short-term market, The Bond Buyer's one-year note index fell 11 basis points, to 4.83% from 4.94%, primarily because of heavy investor demand and the discount rate cut.

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