Against a backdrop of stock market gains, Treasury market losses, and a healthy slate of new issuance in the primary market, tax-exempts posted losses for the 11th consecutive session yesterday.

In the new-issue market, JPMorgan priced $455 million of tax-exempt and taxable bonds for New York ahead of institutional pricing today. Bonds from the tax-exempt $416.3 million Series A mature from 2010 through 2029, with term bonds in 2034 and 2039. Yields range from 1.82% with a 3% coupon in 2011 to 5.24% with a 5% coupon in 2039. Bonds maturing in 2010 will be decided via sealed bid. The bonds are callable at par in 2019. The deal also contains a $38.8 million taxable Series B, which matures in 2019. The credit is rated Aa3 by Moody's Investors Service, AA by Standard & Poor's, and AA-minus by Fitch Ratings.

Morgan Stanley priced $408.7 million of state revolving fund bonds for the Massachusetts Water Pollution Abatement Trust. The bonds mature from 2009 through 2028, with term bonds in 2032 and 2038. Yields range from 0.565 with a 1% coupon in 2009 to 5.02% with a 5% coupon in 2038. The bonds, which are callable at par in 2019, are rated triple-A by all three major rating agencies.

Meanwhile, gilt-edged Maryland competitively sold $199 million of general obligation bonds to Merrill Lynch & Co. with a true interest cost of 3.39%. Pricing information was not available at press time, though the bonds were slated to mature from 2012 through 2023.

This follows Maryland's conclusion Tuesday of a three-day retail order period on $291 million of GOs, priced in the negotiated market by Merrill. The bonds were sold in two series. Bonds from the $225.8 million Series A mature from 2013 through 2024, with yields ranging from 1.84% with a 2% coupon in 2013 to 4.03% with a 5% coupon in 2024. They are callable at par in 2017. Bonds from the $65.8 million Series B mature contain five maturities, all in either 2011 or 2012. The 2011 maturities yield 1.25% with coupons of 3% and 5%, and the 2012 maturities yield 1.47%, with coupons of 5%, 3%, and 2%. The bonds are not callable.

In the secondary market, traders said tax-exempt yields were higher by about three to five basis points yesterday.

"There's been weakness in this market for quite some time, pretty much every day," a trader in Los Angeles said. "But today, you're seeing stocks rise, Treasuries taking a beating, and even though we're not really tied to the Treasury market so much anymore, it's definitely trickling down into our market, and we're feeling it a bit. We're basically a couple basis points weaker than we otherwise would have been, but still obviously weak. We're probably down up to five basis points in spots."

Trades reported by the Municipal Securities Rulemaking Board yesterday showed losses. A dealer sold to a customer insured Arizona Health Facilities Authority 5.375s of 2032 at 5.26%, up three basis points from where they traded Tuesday. A dealer sold to a customer New York City Municipal Water Finance Authority 5s of 2040 at 5.34%, five basis points higher than where they were sold Tuesday. A dealer bought from a customer New York's Rochester Housing Authority 4.8s of 2048 at 5.67%, up five basis points from where they were sold Tuesday. Bonds from an interdealer trade of insured Detroit 5.5s of 2036 yielded 5.15%, five basis points higher than where they traded Tuesday.

"It's definitely weaker again today," a trader in New York said. "It seems like the same story here, day in and day out. But bonds are cheapening up again, with most of the attention on the primary. Not seeing all that much happening in the secondary market right now. But we're down a good three basis points, maybe a little more in spots."

The Treasury market showed losses yesterday on stock market gains. The yield on the benchmark 10-year note, which opened at 2.88%, finished at 2.98%. The yield on the two-year note was quoted near the end of the session at 0.96% after opening at 0.87%. The yield on the 30-year bond, which opened at 3.60%, was quoted near the end of the session at 3.67%.

As of Tuesday's close, 10-year tax-exempt bonds were trading at 108.8% of comparable Treasuries, according to Municipal Market Data. Additionally, 30-year munis were trading at 131.5% of comparable Treasuries. Also, as of the close Tuesday, 30-year tax-exempt triple-A general obligation bonds were trading at 142.4% of the comparable London Interbank Offered Rate.

In other new-issue market activity, San Francisco competitively sold $131.8 million of GO bonds to Wachovia Bank NA with a TIC of 4.54%. The bonds mature from 2009 through 2027, with a term bond in 2029. Yields range from 2.05% with a 4% coupon in 2012 to 5.10% with a 5% coupon in 2029. Bonds maturing from 2009 through 2011 were not formally re-offered. The bonds, which are callable at par in 2019, are rated Aa2 by Moody's, AA by Standard & Poor's, and AA-minus by Fitch.

Oyster Bay, N.Y., competitively sold $125 million of bond anticipation notes to JPMorgan with a net interest cost of 0.57%. The Bans mature in March 2010 with a 1% coupon, and were not formally re-offered. The credit is rated SP-1-plus by Standard & Poor's.

In economic data released yesterday, the Institute for Supply Management's non-manufacturing business activity composite index was 41.6 in February, down from 42.9 in January. Economists polled by Thomson Reuters had expected a 41.0 level.

As the week draws to a close, more economic data will be released, most prominently February non-farm payrolls and the unemployment report, which are released tomorrow. Economists polled by Thomson Reuters are predicting that 648,000 jobs were lost in February, along with a February unemployment rate of 7.9%.

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