Despite volatility in Treasuries, municipal yields ended firmer yesterday as Maryland sold $595 million of general obligation bonds in the new-issue market.

“We improved overall by one to two basis points,” said a trader in New York. “New-issue pricing was firm to strong with a good underlying tone and it shows quite a bit of vitality.”

Traders said the retail side was busy across the board, particularly in the long end.

“People had been waiting, hoping they would see better yields, but they aren’t seeing it so they are finally capitulating,” he said. “Maybe they were thinking about the California issue scheduled for next week, but since it looks like that’s been put on the shelf for the time being, they decided to buy now.”

In new-issue activity, Maryland sold two series of GOs totaling $595 million. All three rating agencies give the bonds triple-A ratings.

Citi bought the larger $400 million series of taxable Build America Bonds with a true interest cost of 4.37%. This series contained maturities from 2019 with a 3.98% yield, or 2.59% after the 35% subsidy, through 2025 with a 4.58% yield, or 2.98% after the subsidy.

The bonds were priced between 40 and 90 basis points over comparable Treasuries.

Jefferies & Co bought the tax-exempt series totaling $195 million of refunding debt with a TIC of 2.96%. The yields range from 2.49% with a 5.00% coupon in 2018 to 3.31% with a 3.13% coupon in 2023.

In the negotiated sector, Ramirez & Co. priced $253 million of mental health facilities improvement revenue bonds for the Dormitory Authority of the State of New York. Approximately $180 million in orders were placed during a retail order period held Tuesday.

The bonds were priced and repriced to yield from 0.80% in 2011 to 4.32% in 2025. One part of a split maturity in 2011 was subject to a sealed bid.

The issue is rated AA-minus by Standard & Poor’s and A-plus by Fitch Ratings.

Citi priced $467 million of bonds for the Indianapolis Local Public Improvement Bond Bank on behalf of the Marion County Health and Hospital Corp.

Series 2010 B-1 totaling $106 million mature from 2013 to 2023, with yields ranging from 1.10% to 3.65%. A retail order period held Tuesday garnered orders totaling $42 million.

Citi also priced $361 million of direct-pay BABs for the same issuer. These bonds will mature in 2030 and 2040, with yields at 5.97% and 6.12%, or 3.89% and 3.98%, respectively, after the subsidy.

Bank of America Merrill Lynch priced two series totaling $185 million of state road bonds for the Missouri Highways and Transportation Commission. The $56.1 million of BABs mature between 2022 and 2025, with yields ranging from 4.72% to 5.02%, or 3.07% and 3.26%, respectively, after the subsidy.

The Series A 2010 tax-exempts, worth $128.9 million, will mature from 2011 to 2019, with coupons ranging from 2.0% to 3.25% respectively.

Both credits are rated Aa2 by Moody’s Investors Service, AA-minus by Fitch, and AA-plus by Standard & Poor’s.

In the Treasury market, yields strengthened across the curve after Federal Reserve Board chairman Ben Bernanke assuaged fears that policy rates would be tightened in congressional testimony.

The benchmark 10-year note closed with a yield of 3.68% after opening at 3.70%. The yield on the two-year closed at 0.86% after opening at 0.89%. The yield on the 30-year bond closed at 4.62%, after opening at 4.63%.

The Municipal Market Data triple-A scale yielded 2.85% in 10 years and 3.82% in 20 years yesterday, following levels of 2.87% and 3.82% on Tuesday.

The scale yielded 4.17% in 30 years yesterday, versus 4.18% on Tuesday.

Tuesday’s triple-A muni scale in 10 years was at 77.8% of comparable Treasuries and 30-year munis were at 90.3%, according to MMD, while 30-year tax-exempt triple-A GOs were at 94.1% of the comparable London Interbank ­Offered Rate.

In his biannual monetary policy testimony before the House Committee on Financial Services, Bernanke reiterated that policy remains unchanged despite last week’s hike in the discount rate.

He characterized the job market as “quite weak” and inflation as “subdued.”

“Bernanke remains particularly concerned about the outlook for unemployment, which historically has been the major factor determining the timing of the first move to tighten rates,” said analysts at RDQ Economics in a research note. “We see no reason at all to change our view that the Fed funds target rate (and the rate of interest paid on reserves) will be left unchanged throughout 2010.”

In economic data released yesterday, new single-family home sales unexpectedly fell to a record low, according to a Census Bureau index that dates back to 1963.

Sales declined 11.2% in January, pushing the seasonally adjusted annual rate of sales to 309,000, compared to the revised December rate of 348,000.

Economists said cold weather may have driven the decline, particularly in the Northeast where sales fell 35% in the month.

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