The Bond Buyer's municipal bond indexes posted moderately lower yields this week, ending a five-week string of rate increases, as fixed-income players decided that the Federal Reserve is not poised to tighten its monetary policy immediately. The 30-year revenue bond index declined nine basis points, to 6.73% yesterday from 6.82% a week ago. Last week it had been at its highest level since April 30, 1992.
The 20-bond and 11 bond indexes of general obligation yields each fell six basis points. The 20-bond index declined to 6.44% from 6.50%, and the 11-bond index dropped to 6.35% from 6.41% last Thursday. week's levels had been the highest for the two indexes since Nov. 5, 1992, when the 20-bond index was 6.51% 11-bond index was 6.42%.
The average yield to maturity the 40 bonds used in calculating the daily Municipal Bond Index -- most of them revenue bonds -- dropped eight basis points, to 6.62% yesterday from 6.70% last Thursday.
Long-term U.S. government securities outperformed the municipal market, as the yield on the bellwether 30-year Treasury bond declined 11 basis points on the week, to 7.83% yesterday from 7.94% last Thursday.
The bond markets' latest revival began last Friday, when the Labor Department reported that jobs on nonfarm payrolls rose only 239,000 in September, below the expected gain of 250,000 to 275,000. Private-sector payrolls rose much less in September than in July or August, leading analysts to believe that the Federal Reserve would wait until after this week's price reports to decide whether to tighten monetary policy. The long Treasury bond rose more than 1/2 point Friday, while municipals rose 1/4 to 3/8 point.
Monday's Columbus Day holiday kept trading activity to a minimum, but traders said the tax-exempt market's tone was firmer. When bond trading resumed Tuesday, municipals rose 1/4 to 3/8 point and easily absorbed a steady flow of bids-wanted lists.
The price advance halted temporarily on Wednesday, as the markets girded themselves for yesterday's producer price report. When news broke that the producer price index fell 0.5% in September, bond prices took off- the 30year Treasury immediately jumped 1 2/32 a points, and municipals 1/2 point. Traders trimmed some of those gains later in the day after they remembered the three key economic reports coming today: consumer prices, industrial production, and retail sales.
In the short end, The Bond Buyer's one-year note index dropped six basis points this week, to 4.08% on Wednesday from 4.14% last Wednesday.