A battered dollar and swelling dealer inventories pushed The Bond Buyer's indexes moderately higher this week for the second consecutive week.
The 20-bond and 11-bond indexes of general obligation yields rose 12 basis points, to 6.16% and 6.07%, respectively, from 6.04% and 5.95% a week ago.
The revenue bond index rose nine basis points, to 6.43% from. 6.34% last week.
The average yield to maturity of the 40 bonds used in the daily Municipal Bond Index, which is comprised mainly of revenue bonds, increased eight basis points, to 6 32% yesterday from 6.24% a week ago.
U.S. Treasury bond prices fared far better than municipals, with the yield on the Treasury's bellwether 30-year bond inching up just one basis point, to 7.39% yesterday from 7.37% the previous Thursday.
Municipal bond prices fell 5/8 to 3/4 point last Friday, in tandem with U.S. governments. The U.S. dollar's decline in overseas markets, signs of rising consumer confidence in a University of Michigan survey, and higher commodities prices triggered the drop in debt prices.
Municipals and Treasuries alike continued to fall Monday and Tuesday, pushed lower by the plunging dollar and burgeoning dealer inventories swollen with bid-wanteds. Taxexempts fell 1/4 to 3/8 point Monday and 1/2 point Tuesday.
Municipals staSed a mild rally Wednesday, finishing unchanged to 1/4 point higher, as the dollar finally steadied, but the gains were tempered by yet another increase in investor bid lists.
The glut in dealer inventories is clearly seen in one key indicator, Standard & Poor's Corp.'s Blue List. The list reached a hefty $2.339 billion yesterday, the highest level in more than seven years. The previous high s for the Blue List was April 15, 1987, when it was $2.466 billion. The Blue List has now risen for 10 straight days, for a cumulative increase of $927 million.
"Everything you see on the Blue List is old and already owned," one trader for a major dealer said. "There's nothing new on there. And there's nothing coming up next week because of the holiday."
Other traders noted that municipal bonds have outperformed Treasury bonds for the past several months and are so rich that mutual funds and other institutional buyers have begun turn to other investments such as corporate securities.
The primary market supply of new issues remained stable this week, with the 30-day visible supply running below $4 billion for the entire week. The visible supply has now been below $5 billion for 29 straight days, and 67 days so far this year. In all of 1993, it was below $5 billion only 78 times.
The Bond Buyer's one-year note index rose five basis points for the second straight week, to 3.65% on Wednesday from 3.60% a week ago.