Yields on The Bond Buyer's weekly bond indexes were basically unchanged this week, as the market turned nervous after last week's double-digit declines in yields.
The 30-year revenue bond index fell to another all-time low, falling three basis points. to 6.33% from 6.36% last week.
The daily Municipal Bond Index's average yield to par call dropped two basis points, to a record low of 6.26% from 6.28% last Thursday. The Bond Buyer began calculating the yield to par call on July 2, 1984.
Yields on the 20-bond general obligation index fell one basis point, to 6.16% from 6.17% a week ago. The index is at its lowest level since Aug. 16, 1979, when it was 6.16%.
The 20-bond and revenue bond indexes have descended for seven consecutive weeks, with the 20-bond index down 42 basis points and the revenue index down 41 basis points.
The 11-bond GO index rose one basis point, to 6.08% from 6.07% last week.
Prices of U.S. Treasury securities weakened slightly this week, pushing the 30-year bond's yields two basis points higher, to 7.61% from 7.59%. Treasuries suffered a sell-off Monday amid speculation that West Germany's Bundesbank would raise its discount rate. The rate was increased to 6.75% from 6% yesterday.
A government bond trader said the market's concern about the competitive position of U.S. Treasury securities was justified. "We're the only ones in the Western world with rates dropping like a stone," the trader said.
The municipal market managed to hold prices steady in the face of the Treasury market decline and a weakening dollar. But the market acted cautiously, traders said, despite still strong technical factors.
"Everything is in limbo right now," one trader said. "We're feeling overbought, and the high levels make people nervous."
That concern finally brought on a minor market correction Tuesday, driving prices down about 1/4 point on average, and several retail houses reported customer selling.
The selling was orderly and the Street picked up much of the bonds sold, traders said, but the shaky tone remained.
"The market has done a long run-up, and people who jumped in late are nervous," a trader said Wednesday.
Tuesday's key economic releases were within expectations. Retail sales increased 0.5% in June, with the help of a surge in automobile sales. But sales excluding autos rose only 0.1%. The consumer price index rose 0.3% in June, following a 0.1% increase in May.
By Wednesday, the market was able to regain some of the losses, following reports that industrial production dropped 0.3% in June, reversing a string of four straight monthly increases. Capacity utilization declined 0.4 percentage point in June, to 78.5%.
"Bids for bonds are strong and we seem to be back on track," said one trader. "The August refunding announcement is down the road, but there's not much out there to stop us before then."
In the short-term note sector, The Bond Buyer's one-year note index rose 12 basis points to 3.15% from 3.03%.