Munis Slightly Weaker; Two Big Deals Price

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The municipal market was unchanged to slightly weaker yesterday, following Treasuries, as two $1 billion transactions were priced in the primary market.

Traders said tax-exempt yields were flat to higher by one or two basis points.

"The new issues have brought the market down a bit, and Treasuries turning around and weakening didn't help matters either," a trader in New Jersey said.

In the new-issue market yesterday, Lehman Brothers priced $1.1 billion of general revenue bonds for New York's Triborough Bridge and Tunnel Authority in two series. Bonds from the larger $825.7 million series mature from 2009 through 2021, with term bonds in 2023, 2028, 2029, 2030, 2033, 2037, and 2038. Yields range from 2.10% with a 5% coupon in 2009 to 5.00% with a 5.25% coupon in 2038.

Bonds from the smaller $248.5 million series mature in 2025, 2028, and 2038, yielding 3.63% in 2025, 3.81% in 2028, and 3.98% in 2038, all priced at par. Selected yields were altered at repricing. Yields on bonds maturing in 2009 were lowered by 10 basis points at repricing, while yields on bonds maturing from 2010 through 2013 were raised by two to three basis points. All other yields were left the same. The bonds are rated Aa2 by Moody's Investors Service, AA-minus by Standard & Poor's, and AA by Fitch Ratings.

Also, Bear, Stearns & Co. priced $1 billion of power supply revenue bonds for the California Department of Water Resources. The bonds mature in 2017, 2018, 2021, and 2022, with yields ranging from 3.79% with a 4% coupon in 2017 to 4.64% with a 5% coupon in 2022. The bonds are insured by Financial Security Assurance Inc., but portions of bonds maturing in 2017, 2021, and 2022 - totaling about $486 million - are uninsured. The underlying credit is rated Aa3 by Moody's, A by Standard & Poor's, and A-plus by Fitch.

The Treasury market showed some losses yesterday. The yield on the benchmark 10-year Treasury note, which opened at 3.47%, finished at 3.55%. The yield on the two-year note was quoted near the end of the session at 1.62%, after opening at the same level.

In economic data released yesterday, initial jobless claims for the week ended March 8 came in at 353,000, after a revised 353,000 the previous week. Economists polled by IFR Markets had predicted 358,000 initial claims.

Continuing jobless claims for the week ended March 1 came in at 2.835 million, after a revised 2.828 million the prior week. Economists polled by IFR had predicted 2.835 million continuing claims.

Retail sales dipped 0.6% in February, after a revised 0.4% gain the previous month. Economists polled by IFR had predicted a 0.2% rise.

Retail sales excluding autos fell 0.2% in February, after a revised 0.5% uptick the prior month. Economists polled by IFR had predicted a 0.2% jump.

Business inventories rose 0.8% to $1.458 billion following an upwardly revised 0.7% gain in December. IFR Markets had projected that business inventories would be up 0.5% in the month.

Meanwhile, a 1.5% increase in overall business sales brought the category to $1.163 billion. The January figure followed a downwardly revised 0.6% decline in December, and compared to IFR's projected 0.3% decrease.

Economic data to be released today includes the February consumer price index and the preliminary March University of Michigan consumer sentiment index.

Economists polled by IFR Markets are predicting a 0.3% uptick in the CPI, a 0.2% increase in the core CPI, and a 69.5 Michigan sentiment reading.

In other new-issue market activity, Merrill Lynch & Co. priced $567 million of federally taxable school loan revolving fund bonds for the Michigan Municipal Bond Authority. The bonds mature in 2048. The credit is rated Aa2 by Moody's, AA-minus by both Standard & Poor's and Fitch.

New York competitively sold $256.6 million of general obligation bonds to Citi with a true interest cost of 4.14%. The bonds mature from 2009 through 2028, with a term bond in 2038. Yields range from 2.54% with a 3% coupon in 2011 to 4.82% with a 4.5% coupon in 2027. Bonds maturing in 2009, 2010, 2018, 2028, and 2038 were not formally re-offered. The bonds, which are callable at par in 2018, are rated Aa3 by Moody's, AA by Standard & Poor's, and AA-minus by Fitch.

Also, Goldman, Sachs & Co. priced $223.2 million of wastewater revenue bonds for Virginia's Hampton Roads Sanitation District. The bonds mature from 2009 through 2028, with term bonds in 2033 and 2038. Yields range from 2.15% with a 3% coupon in 2009 to 5.07% with a 5% coupon in 2038. The bonds, which are callable at par in 2018, are rated Aa3 by Moody's, AA-plus by Standard & Poor's, and AA by Fitch.

Additionally, media reports indicated that Blue River Asset Management will liquidate its main municipal bond fund over the next few months, but plans to open a new domestic fund to stay in business.

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