The municipal market was once again firmer yesterday, with much of the gains situated on the short end of the scale.

"We're better again today," a trader in New York said. "Pretty much continuing the theme from the last couple of weeks. We're seeing pretty sizeable gains on the short end right now, maybe six basis points or so, but it kind of decreases a bit as you go further out the curve. Long-term paper isn't really much better at all, maybe a basis point or two. But it's definitely firmer, and there's a good amount of trading going on."

The Treasury market showed little movement yesterday. The yield on the benchmark 10-year Treasury note, which opened at 2.20%, was quoted near the end of the session at 2.21%. The yield on the two-year note was quoted near the end of the session at 0.72%, after opening 0.71%. The yield on the 30-year bond, which opened at 2.89%, was quoted near the end of the session at 2.88%.

"There's just still a good amount of demand out there," a trader in Los Angeles said. "For the most part, business is getting done, though a little less today than the last few days. And I'm not sure how much activity there will be tomorrow, with the long weekend approaching. But there's a decidedly firmer tone out there, and has been for quite some time now."

In the new-issue market yesterday, Morgan Stanley priced $390.5 million of revenue bonds for Michigan's Royal Oak Hospital Finance Authority. The bonds mature in 2014, 2029, and 2039, yielding 6.40% with a 6.25% coupon, 8.40% with an 8% coupon, and 8.65% with an 8.25% coupon, respectively. The bonds, which are callable at par in 2018, are rated A1 by Moody's Investors Service and A by Standard & Poor's and Fitch Ratings.

Greenwich, Conn., competitively sold $72 million of general obligation bond anticipation notes to Morgan Stanley with a net interest cost of 0.38%. The Bans mature in 2010, with a 1% coupon. They were not formally re-offered. The credit is rated MIG-1 by Moody's and F1-plus by Fitch.

Gloucester County, N.J., competitively sold $40 million of GO bond to Morgan Stanley with a NIC of 2.90%. The bonds mature from 2010 through 2022, with coupons ranging from 2% in 2010 to 3.5% in 2022. None of the bonds were formally re-offered. The bonds, which are callable at par in 2017, are rated Aa3 by Moody's and AA-plus by Standard & Poor's.

Depfa First Albany Securities LLC priced $39.3 million of public improvement refunding bonds for Hempstead, N.Y., in two series. Bonds from the $31.9 million Series A mature from 2009 through 2014, with yields ranging from 0.97% with a 3% coupon in 2010 to 1.88% with a 4% coupon in 2014. Bonds maturing in 2009 were not formally re-offered. Bonds from the $7.4 million Series B mature from 2010 through 2015, with yields ranging from 0.56% with a 3% coupon in 2010 to 2.06% with a 4% coupon in 2015. None of the bonds are callable. The credit is rated Aa1 by Moody's and AAA by Standard & Poor's.

Illinois' Fountaindale Public Library District competitively sold $20.8 million of GO library building bonds to Robert W. Baird & Co. with a true interest cost of 3.94%. The bonds mature from 2010 through 2023, and from 2024 through 2027. Yields range from 1.10% with a 2% coupon in 2010 to 4.55% with a 4.5% coupon in 2028. Bonds maturing in 2025 were not formally re-offered. The bonds, which are callable at par in 2019, are insured by Assured Guaranty Corp.

Charleston, S.C., competitively sold $18.1 million of GO bonds to UBS with a NIC of 3.41%. The bonds mature from 2010 through 2023, with coupons ranging from 2% in 2010 to 4% in 2023. None of the bonds were formally re-offered. The bonds, which are callable at par in 2017, are rated Aa2 by Moody's and AAA by Standard & Poor's.

In economic data released yesterday, initial jobless claims for the week ended Jan. 10 came in at 524,000, after a revised 470,000 the previous week. Economists polled by Thomson Reuters had predicted 500,000 initial jobless claims.

Continuing jobless claims for the week ended Jan. 3 came in at 4.497 million, after a revised 4.612 million the previous week. Economists polled by Thomson Reuters had predicted 4.620 million continuing jobless claims.

The producer price index dipped 1.9% in December after a 2.2% drop in November. Economists polled by Thomson had predicted a 2.0% decline.

The PPI core climbed 0.2% in December after a 0.1% rise the prior month. Economists polled by Thomson had predicted a 0.1% uptick.

The Empire State Manufacturing Survey "indicates that conditions for New York manufacturers continued to deteriorate in January," the Federal Reserve Bank of New York yesterday reported, as the general business conditions index narrowed to negative 22.20 in January from negative 27.88 in December. Economists surveyed by Thomson Reuters had expected the index would be negative 25.00.

Manufacturing activity in the Federal Reserve Bank of Philadelphia's region "continued to be depressed" in January, although the general business conditions index increased to negative 24.3 in January from negative 36.1 in December, this month's Report on Business indicates. Economists surveyed by Thomson predicted a reading of negative 35.0 for the index.

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