Yields in the municipal market were flat to slightly elevated yesterday, following a largely unchanged morning. Traders said the weakness in the tax-exempt market was found mostly within the first 10 years of the curve.

"It really depends on what part of the curve you're talking about," a trader in Los Angeles said. "Out long, you might not really see any movement at all. Short-end paper might be weaker by a basis point or so. And there are exceptions to that here and there, but overall, I think that's pretty much the range."

Trades reported by the Municipal Securities Rulemaking Board yesterday showed some losses. A dealer sold to a customer King County, Wash., 5s of 2038 at 5.10%, one basis point higher than where they traded Monday. Bonds from an interdealer trade of Nevada 5s of 2027 at 5.05%, up one basis point from where they traded Monday. Bonds from an interdealer trade of Massachusetts 5s of 2034 at 5.04%, even with where they were sold Monday. A dealer bought from a customer Dormitory Authority of the State of New York 5.25s of 2038 at 5.08%, two basis points higher than where they were sold Monday. A dealer sold to a customer Puerto Rico Sales Tax Financing Corp. 6.05s of 2036 at 6.19%, even with where they traded Monday. Bonds from an interdealer trade of insured Chicago Board of Education 5s of 2027 at 5.09%, one basis point higher than where they were sold Monday.

"It's not straight across the board, but bonds are cheapening up some," a trader in New York said. "The long end is still pretty flat, for example. But up to like 10, 15 years, you've got bonds cheapening to the tune of three, four basis points in some spots. But I'd say one or two overall, if you're talking about the market in general. We'll see what happens tomorrow when some of the bigger deals price."

The Treasury market showed losses yesterday. The yield on the benchmark 10-year note, which opened at 2.75%, finished at 2.81%. The yield on the two-year note was quoted near the end of the session at 0.99% after opening at 0.93%. The yield on the 30-year bond, which opened at 3.50%, was quoted near the end of the session at 3.51%.

The Treasury Department yesterday auctioned $40 billion of two-year notes with a 7/8% coupon, at a 0.961% yield, a price of about 99.83. The bid-to-cover ratio was 2.63. Federal Reserve banks also bought $2.14 billion for their own account in exchange for maturing securities.

As of Monday's close, 10-year tax-exempt bonds were trading at 105.9% of comparable Treasuries, according to Municipal Market Data. Additionally, 30-year munis were trading at 136.3% of comparable Treasuries.

In the new-issue market yesterday, Colorado's Boulder Valley School District No. RE-2 competitively sold $176.8 million of general obligation bonds to Merrill Lynch & Co., who beat out four other bids with a true interest cost of 4.74%.

The bonds mature from 2010 through 2032, with a term bond in 2034. Yields range from 1.61% with a 4% coupon in 2011 to 5.00% priced at par in 2034. Bonds maturing in 2010, from 2015 through 2018, from 2021 through 2024, and in 2027, 2028, 2031, and 2032 were not formally re-offered. The bonds, which are callable at par in 2019, are rated Aa2 by Moody's Investors Service and AA by both Standard & Poor's and Fitch Ratings.

Wachovia Bank NA priced $72 million of GO refunding bonds for Union County, N.C. The bonds mature from 2010 through 2030, with yields ranging from 0.70% with a 2.5% coupon in 2010 to 4.73% with a 4.5% coupon in 2030. The bonds, which are callable at par in 2019, are rated Aa2 by Moody's and AA by both Standard & Poor's and Fitch.

Onondaga County, N.Y., competitively sold $61.7 million of GOs to Wachovia Bank at a TIC of 3.56%. The bonds mature from 2011 through 2029, with yields ranging from 1.45% with a 4% coupon in 2011 to 4.72% with a 4.5% coupon in 2029. The bonds, which are callable at par in 2019, are rated Aa2 by Moody's and AA-plus by Standard & Poor's and Fitch.

Beaufort County, S.C., competitively sold $48.8 million of GO bond anticipation notes to JPMorgan with a net interest cost of 0.64%. The Bans mature in March 2010, with a 1.75% coupon, and were not formally re-offered. The credit is rated MIG-1 by Moody's and SP-1-plus by Standard & Poor's.

The Shelby County, Ky., School District Finance Corp. competitively sold $35.7 million of school building revenue bonds to Robert W. Baird & Co. with a NIC of 4.87%. The bonds mature from 2010 through 2026, with term bonds in 2028 and 2029. Yields range from 2.22% with a 3.25% coupon in 2011 to 4.88% with a 4.75% coupon in 2026. Bonds maturing in 2010, 2028, and 2029 were not formally re-offered. The bonds, which are callable at par in 2019, are rated Aa3 by Moody's.

Franklin, Mass., competitively sold $17.9 million of municipal purpose GO bonds to Morgan Keegan & Co. with a TIC of 3.49%. The bonds mature from 2010 through 2028, with coupons ranging from 2.25% in 2010 to 4.5% in 2028. None of the bonds were formally re-offered. The bonds, which are callable at par in 2019, are rated AA by Standard & Poor's.

In economic data released yesterday, the consumer confidence index plunged in February, falling to an all-time low of 25.0 from a downwardly revised 37.4 last month. Economists polled by Thomson Reuters predicted the index would drop to 35.5.

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