The municipal market was weaker yesterday, following Treasuries. Traders said tax-exempt yields were lower by about three basis points.

"The market is still struggling with the issue" of Financial Security Assurance Inc. and Ambac Assurance Corp. being placed on negative watch by Moody's Investors Service late Monday, a trader in Chicago said. "Like a sports figure or politician, it's now 'guilty until proven innocent' instead of 'innocent until proven guilty.' "

A trader in New York, however, said that despite the weakness, the market "feels better than it did" Tuesday.

"It looked like the end of the world [Tuesday], but there's actually business going on [yesterday]," the trader said. "There was business going on [Tuesday], but it was at a very distressed level. We might be off a little bit because Treasuries are off a little bit, but I don't think we're underperforming Treasuries [yesterday]."

The Treasury market showed losses. The yield on the benchmark 10-year Treasury note, which opened at 4.09%, finished at 4.12%. The yield on the two-year note was quoted near the end of the session at 2.74% after opening at 2.72%.

The economic calendar was light yesterday, but a slate of economic data will be released today and tomorrow. Initial jobless claims for the week ended July 19 will be released today, along with continuing jobless claims for the week ended July 12, and June existing home sales. Tomorrow, durable goods orders for June, new home sales for June, and the final July University of Michigan consumer sentiment index will be released.

Economists polled by IFR Markets are predicting 375,000 initial jobless claims, 3.120 million continuing jobless claims, 4.940 million existing home sales, a 0.4% decline in durable goods, a 0.2% dip in durable goods excluding transportation, 505,000 new home sales, and a 56.4 reading of the University of Michigan sentiment index.

In the new-issue market yesterday, Goldman, Sachs & Co. priced $855.6 million of bonds for the Los Angeles Department of Airports in multiple series.

Bonds from the $600.8 million Series A, which is subject to the alternative minimum tax, mature from 2011 through 2028, with term bonds in 2030, 2033, and 2038, and with yields ranging from 3.80% with a 3.75% coupon in 2011 to 5.65% with a 5.375% coupon in 2038. The bonds are callable at par in 2018.

Bonds from the $7.9 million Series B, also subject to the AMT, mature from 2009 through 2015, with yields ranging from 2.52% with a 3% coupon in 2009 to 4.58% with a 5% coupon in 2015. These bonds are not callable. And bonds from the $246.9 million Series C, which is not subject to the AMT, mature from 2009 through 2029, with term bonds in 2033 and 2038. Yields range from 2.00% with a 3% coupon in 2009 to 5.35% with a 5.25% coupon in 2038. These bonds are callable at par in 2018.

Bonds from series A and B are rated Aa3 by Moody's Investors Service and AA by both Standard & Poor's and Fitch Ratings. Bonds from Series C are rated A1 by Moody's, and AA-minus by Standard & Poor's and Fitch.

The Port Authority of New York and New Jersey sold $500 million of consolidated bonds to Merrill Lynch & Co, with a true interest cost of 4.94%. The bonds mature from 2018 through 2033, with term bonds in 2035 and 2038. Bonds maturing in 2035 yield 5.00%, priced at par. All remaining bonds were not formally re-offered. The bonds, which are callable at par in 2018, are rated Aa3 by Moody's, and AA-minus by both Standard & Poor's and Fitch.

Morgan Stanley priced $252.6 million of state contract bonds for the New Jersey Health Care Facilities Authority. The bonds mature from 2009 through 2018, with term bonds in 2023, 2028, and 2038. Yields range from 2.42% with a 5% coupon in 2009 to 5.45% with a 5.25% coupon in 2038. The bonds, which are callable at par in 2018, are rated A1 by Moody's, AA-minus by Standard & Poor's, and A-plus by Fitch.

M.R. Beal & Co. priced $200 million of state revolving fund general revenue bonds for Connecticut. The bonds mature from 2009 through 2018, with yields ranging from 2.18% with a 3% coupon in 2010 to 3.84% with a 3.75% coupon in 2018. Bonds maturing in 2009 will be decided via sealed bid. The bonds, which are not callable, are rated triple-A by all three major rating agencies.

Morgan Stanley priced $132.6 million of revenue bonds for the Maryland Health and Higher Educational Facilities Authority. The bonds mature in 2013, 2018, and 2038, yielding 3.16% with a 5% coupon, 3.92% with a 5% coupon, and 4.92% with a 5.25% coupon, respectively. The bonds, which are callable at par in 2018, are rated Aa2 by Moody's, AA by Standard & Poor's, and AA-plus by Fitch.

California's Santa Clara Unified School District competitively sold $120 million of general obligation bonds to Prager, Sealy & Co., with a TIC of 4.80%. The bonds mature from 2009 through 2033, with yields ranging from 1.65% with a 5% coupon in 2009 to 4.13% with a 4% coupon in 2018. Bonds mature from 2019 through 2033 were not formally re-offered. The bonds, which are callable at par in 2016, are rated AA by Standard & Poor's.

Also, Danbury, Conn., competitively sold $94 million of GO bonds and notes. Danbury sold $74.3 million of GO bond anticipation notes to various bidders. Morgan Stanley brought in the largest chunk, worth $49.8 million, with a net interest cost of 1.51%. The Bans mature in July 2009, yielding 3.00%, priced at par. Danbury also sold $20 million of GO bonds to Banc of America Securities LLC, with a TIC of 4.20%.

The bonds mature from 2009 through 2028, with yields ranging from 2.24% with a 5% coupon in 2010 to 4.57% with a 4.5% coupon in 2025. Bonds maturing in 2009, from 2011 through 2013, and from 2026 through 2028 were not formally re-offered. The bonds are callable at par in 2015. The notes are rated MIG-1 by Moody's, SP-1-plus by Standard & Poor's, and F1-plus by Fitch. The bonds are rated Aa2 by Moody's and AA-plus by both Standard & Poor's and Fitch.

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