A robust Treasury market pushed yields lower on The Bond Buyer's weekly indexes this week to continue their downward trend, with the 40-bond gauge hitting a new low.

The average yield to maturity of the 40 bonds used to calculate the daily Municipal Bond Index was a record low 5.69%. down two basis points from 5.71% last week. The index stands at its lowest point since The Bond Buyer began calculating the yield in January 1985.

The 20-bond index was calculated at 5.50%, down five basis points from 5.55% last week, the lowest level since March 4, when it was 5.47%.

The 11-bond index was pegged at 5.40%, down five basis points from 5.45% last week. That was the lowest it has been since 5.37% on March 4.

The 30-year revenue bond index was tallied at 5.74%, down two basis points from 5.76% last week and its low since March 4. when it reached an all-time low of 5.69%.

The Treasury bond yield was 6.55%, down 11 basis points from 6.66% last week. This is the lowest yield since the Treasury began selling 30-year bonds in 1977.

The one-year note index was calculated at 2.80%, up 17 basis points from 2.63% last week, its highest level since Nov. 25, 1992, when it was 2.84%.

The municipal market benefited more from a surge in Treasury prices than investor demand this past week.

The yield on the benchmark Treasury long bond fell from 6.63% last Friday to 6.55% yesterday. Good inflation news was one of the chief reasons for the price rise.

In the municipal arena, a slate of offerings totaling over $5 billion found its way into the market.

Some bond offerings were priced aggressively and structured to appeal to intermediate and short-term buyers, while others were priced at levels considered cheap to the market. Results from all the sales were mixed overall, according to market participants.

A market analyst said, "The muni market is hanging on by its teeth based upon what the Treasury market has been doing."

He noted that the long end of the municipal market has not fared as well, with most of the money coming into the short and intermediate sectors.

"Intermediate funds show good flows," he said. "The support for the muni market is intermediate funds, cross-market buyers, state specialty funds, and a few individuals."

One of the largest issues of this week, a $1.1 billion Puerto Rico Highway and Transportation Authority offering, featured a number of derivative products, designed in part to appeal to investors in the short end of the market.

"The support which we have had -- long-end, open-end bond funds -- are not spending their money now," the market analyst said. The July 1 effect, when $15 billion redemptions and about $22 billion of coupons payments were made, actually was factored into the municipal market in May and June, he said.

The secondary market has been very inactive because everyone is focused on the primary sector, he said

Looking to the near-term municipal market, the analyst said, "The biggest concern among the big wire houses is that the retail sector is softer, which may not support the forward calendar."

This development may have been caused by "sticker shock, running out of cash, or flows coming out of funds and now going to the stock market," he said.

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