Municipal bond prices rallied briefly last Tuesday and Wednesday, but not enough to make uP for losses earlier in the week, leaving yields on The Bond Buyer's weekly bond indexes modestly higher compared to the week before.

The 20-bond and 11-bond indexes of general obligation bond yields both increased three basis points last Wednesday, to 5.49% and 5.38%, respectively, from 5.46% and 5.35% on Nov. 18. The indexes are at their highest points since Aug. 5, when the 20-bond was 5.61% and the 11-bond was 5.53%.

The revenue bond index rose four basis points, to 5.74% from 5.70% the week before. The revenue bond index has not been that high since Aug. 5 when it was 5.83%.

In the U.S. government securities market, the 30-year Treasury bond's yield rose eight basis points, to 6.30% from 6.22% on Nov. 18.

The average yield to maturity of the 40 bonds used to calculate the daily Municipal Bond Index, which is comprised mainly of revenue bonds, was up five basis points, to 5.66% from 5.61%.

The indexes were calculated on Wednesday, one day earlier than usual, because of the Thanksgiving holiday.

"What we've been experiencing is a continuation of a technical sell-off," a portfolio manager said. "There hasn't been a change in the fundamentals. Although there's been some pickup in the economy, generally ally inflation and Fed policy have been supportive.

"People are so extended we've had these repeated sell-offs. While it looked pretty ugly going down, I think we're at the end of it now."

"Dealers are pulling in their horns as we head for yearend," a market analyst said. "They're trying to liquidate some positions, and this past week it was compounded with the mutual funds selling as well, causing rates to back up. Inventories were also heavy this week." Dealer inventories have been a drag on the market since September. The Blue List has fallen below $1.5 billion only once since Sept. 21 and has averaged more than $1.8 billion in October and November. Last week, it ranged from $1.7 billion to $1.82 billion.

The Bond Buyer's 30-day visible supply has eased slightly in recent weeks, although it rose last week, to $5.38 billion Wednesday from $4.17 billion on Nov. 19. Despite the gain, visible supply remained well below the year's average of $6.07 billion and November's $5.58 billion.

While municipal bond yields have been generally moving higher over the past seven weeks, they are still considerably lower than levels at the beginning of 1993. The 20-bond index has fallen 70 basis points from its 1993 high of 6.19% on Jan. 14, the 11-bond index has dropped 72 basis points from its high of 6.10%, also on Jan. 14, and the revenue bond index has declined 70 basis points from its high of 6.44% on Jan. 7.

The short-term market moved in the opposite direction, with The Bond Buyer's one-year note index off nine basis points, to 2.55% from 2.64% on Nov. 17. The one-year note index has not been that low since the 2.53% of June 16.

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