Participants focused on the municipal new-issue market yesterday as the bulk of the week's largest scheduled transactions sold and secondary yields climbed. The largest deal priced was a $4.5 billion sale from a Puerto Rico issuer, about which little information was released.Citi priced $4.5 billion of revenue bonds for the Puerto Rico Sales Tax Financing Corp., following a two-day retail order period which concluded Tuesday. The bonds mature from 2015 through 2029, with term bonds in 2037, 2039, 2042, and 2044.

"We had strong retail demand north of $400 million," said Fernando Batlle, executive vice president for financing and treasury at the Government Development Bank for Puerto Rico via text message. "We went to the institutional market, and under difficult market conditions are very pleased with having achieved over $4 billion in orders, making this the largest transaction in the history of Puerto Rico."

Preliminary pricing yields range from 3.75% priced at par in 2015 to 6.00% with a 6.375% coupon in 2044. The bonds are callable at par in 2019, except for bonds maturing in 2029, which are callable at par in 2014. The deal also contains $117.3 million of capital appreciation bonds, which mature in 2030, 2031, and 2034. The bonds are rated A2 by Moody's Investors Service, A-plus by Standard & Poor's, and A by Fitch Ratings.

However, though indications were that Citi completed final pricing on the deal at some point yesterday, nothing had been officially released by press time, and many market participants had little information.

"I haven't seen a ton of sales out there on the Puerto Rico," a trader in New York said. "It could be that they're not free to trade yet, but I just haven't heard. There's really just not much out there on it if you're not involved in the deal, and we aren't, but it feels like they're just trying to slip it through somewhat unnoticed. I've heard they repriced, but I haven't seen it, but from what I saw in the morning, it wasn't a bad pricing."

"I think the deal took too long to get done," a second trader in New York said. "The market isn't in great shape right now. It's hard to say how the deal is doing, I haven't seen a final pricing - no one really has. They're being a bit coy, I guess. But it's not a bad credit, it's actually pretty good for a Puerto Rico. It's much more attractive than some of the other stuff that's out there. But even if this deal doesn't get off to a good start, I think it might catch up."

Traders said tax-exempt yields in the secondary market were higher by four to six basis points.

"It's a bit weaker again," a third trader in New York said. "We're sort of steadily weakening, but we're doing so in somewhat light activity. There's just not a whole lot of attention being paid to the secondary market at the moment. People are generally focused on the new issues."

"I'm just trying to keep my head down as much as I can," a trader in Los Angeles said. "It's like if you throw a bid out there, even though it may be ridiculously cheap, you might end up getting stuck with it. So you really need to be careful about what you do."

Elsewhere in the new-issue market yesterday, RBC Capital Markets priced $431 million of state personal income tax revenue bonds for the New York State Thruway Authority. The bonds mature from 2010 through 2029, with yields ranging from 1.30% with a 2.5% coupon in 2011 to 4.84% with a 5% coupon in 2029. Bonds maturing in 2010 were decided via sealed bid. The bonds, which are callable at par in 2019, are rated AAA by Standard & Poor's and AA-minus by Fitch.

Morgan Stanley priced $330.7 million of taxable Build America Bonds for the University of Texas System Board of Regents. The bonds mature in 2041, yielding 6.28% priced at par, or 4.08% after the 35% federal subsidy. The bonds were priced to yield 160 basis points over the comparable U.S. Treasury yield, and are callable at par in 2019.

The Board of Regents also sold $86 million of tax-exempt revenue bonds, priced by Barclays Capital. The bonds mature from 2009 through 2029, with yields ranging from 1.65% with a 4% coupon in 2011 to 5.12% with a 5% coupon in 2029. Bonds maturing in 2009 and 2010 were decided via sealed bid. The bonds, which are callable at par in 2019, are rated Aa3 by Moody's and AA-minus by Standard & Poor's.

Morgan Stanley also priced $150.4 million of taxable revenue bonds for the Nebraska Public Power District in two series, including $50 million of BABs. Bonds from the $50.4 million BAB series mature in 2026 and 2035, and were priced to yield 265 and 260 basis points over the comparable Treasury yields. They are callable at par in 2019. Bonds from the $100 million taxable, non-BAB series mature in 2013 and 2014. No further pricing details were available. The credit is rated A1 by Moody's, A by Standard & Poor's, and A-plus by Fitch.

RBC also priced $118.5 million of general obligation bonds for Denver in two series. Bonds from the $104.5 million Series A mature from 2010 through 2025, with yields ranging from 1.30% with a 3% coupon in 2011 to 4.30% with a 5% coupon in 20205. Bonds maturing in 2010 were decided via sealed bid. These bonds are callable at par in 2019.

Bonds from the $14 million Series B mature from 2010 through 2015, with yields ranging from 1.30% with a 2% coupon in 2011 to 2.72% with a 3% coupon in 2015. Bonds maturing in 2010 were decided via sealed bid. These bonds are not callable. The credit is rated Aa1 by Moody's, AAA by Standard & Poor's, and AA-plus by Fitch.

Merrill Lynch & Co. priced $100 million of pollution control revenue refunding bonds for the Ohio Air Quality Development Authority. The bonds mature in 2029, yielding 4.75% priced at par. The bonds, which are not callable, have a mandatory put in 2012. The credit is rated Baa1 by Moody's and BBB by Standard & Poor's.

The Treasury market showed losses yesterday. The yield on the benchmark 10-year note, which opened at 3.86%, was quoted near the end of the session at 3.95%. The yield on the two-year note was quoted near the end of the session at 1.37% after opening at 1.30%. The yield on the 30-year bond, which opened at 4.65%, was quoted near the end of the session at 4.76%.

The Treasury Department auctioned $19 billion of 10-year notes with a 3 1/8% coupon at a 3.990% high yield, a price of about 92.97. The bid-to-cover ratio was 2.62. Federal Reserve banks bought about $200.8 million for their own account in exchange for maturing securities.

As of Tuesday's close, the triple-A muni scale in 10 years was at 83.4% of comparable Treasuries, according to Municipal Market Data.

Additionally, 30-year munis were 101.7% of comparable Treasuries. Also, as of the close Tuesday, 30-year tax-exempt triple-A general obligation bonds were at 105.8% of the comparable London Interbank Offered Rate.

Also yesterday, final pricing details were released on Citi's $725.3 million sale of general obligation bonds for Hawaii, which was priced late Tuesday in two series.

Bonds from the larger $500 million series mature from 2013 through 2029, with yields ranging from 2.30% with a 3% coupon in 2013 to 4.72% with a 5% coupon in 2029.

Bonds from the smaller $225.3 million series mature from 2014 through 2019, with yields ranging from 2.66% with a 3% coupon in 2014 to 3.72% with a 5% coupon in 2019. The bonds are not callable. The credit is rated Aa2 by Moody's and AA by both Standard & Poor's and Fitch.

The economic calendar was light yesterday.

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