The municipal market was slightly firmer yesterday. Traders said tax-exempt yields were lower by about one or two basis points.

“There’s obviously a very firm tone. There’s a sense that the end may be near in terms of the firmness, but the market isn’t slowing down too much just yet,” a trader in New York said. “You’ve got to go out pretty long to get 4%. We’re fine in a relative sense, but in an absolute sense, it’s kind of scary.”

Trades reported by the Municipal Securities Rulemaking Board yesterday showed some gains. Bonds from an interdealer trade of New York State Dormitory Authority 5s of 2026 yielded 4.02%, two basis points lower than where they traded Tuesday. A dealer bought from a customer insured California 4.25s of 2033 at 4.61%, even with where they were sold Tuesday. A dealer sold to a customer insured Chicago O’Hare International Airport 5s of 2038 at 4.44%, even with where they were priced in the new-issue market Tuesday. Bonds from an interdealer trade of insured Los Angeles Municipal Improvement Corp. 4.5s of 2037 yielded 4.64%, down two basis points from where they were sold Tuesday.

The Treasury market, however, showed some losses yesterday. The yield on the benchmark 10-year Treasury note, which opened at 3.67%, finished at 3.73%. The yield on the two-year note was quoted near the end of the session at 2.50% after opening at 2.47%.

In economic data released yesterday, the consumer price index rose 0.3% in December after an 0.8% gain in November. Additionally, the core CPI grew 0.2% in December after a 0.2% climb the month before. Economists polled by IFR Markets had predicted a 0.2% jump in CPI and a 0.2% increase in core CPI.

Industrial production showed no gain in December after a 0.3% uptick in November. Economists polled by IFR Markets had predicted a 0.5% decline.

In the new-issue market yesterday, the Florida Department of Transportation competitively sold $342 million of turnpike revenue bonds to JPMorgan with a true interest cost of 4.17%. The bonds mature from 2008 through 2029, with term bonds in 2032, 2035, and 2037. Yields range from 3.52% with a 5% coupon in 2018 to 4.58% with a 4.5% coupon in 2037. The bonds are callable at 101 in 2017, declining to par in 2018. Moody’s Investors Service rates the credit Aa2, and Standard & Poor’s and Fitch Ratings rate it AA-minus.

Merrill Lynch & Co. priced $58.6 million of public improvement sales tax revenue and refunding bonds for Baton Rouge, La., in three series. Bonds from the $1.9 million Series A-1, subject to the alternative-minimum tax, mature from 2008 through 2012, with yields ranging from 3.24% with a 4.25% coupon in 2008 to 3.67% with a 4.5% coupon in 2012. Bonds from the $47.2 million Series A-2, which is not subject to the AMT, mature from 2012 through 2027, with term bonds in 2032, 2033, and 2037. Yields range from 2.95% with a 4% coupon in 2012 to 4.39% with a 5% coupon in 2037.

The deal also contains Series B, a $9.5 million taxable component, maturing in 2012, 2017, and 2022. Only the bonds from Series A-2 are callable at par in 2018. The issue is insured by Financial Security Assurance Inc., and the underlying credit is rated Aa3 by Moody’s and AA by Standard & Poor’s and Fitch.

Greenwich, Conn., competitively sold $45 million of general obligation bond anticipation notes to various bidders. Morgan Stanley won the largest chunk of the deal, $35 million, with an effective rate of 2.509%. Roosevelt & Cross took home the other portion, $10 million, with an effective rate of 2.503%. The Bans mature in Jan. 2009, yielding 2.49% with a 3% coupon. The notes are rated MIG-1 by Moody’s and F-1-plus by Fitch.

Merrill also priced $35.4 million of water and sewer revenue refunding bonds for Scottsdale, Ariz. The bonds mature from 2008 through 2023, with yields ranging from 2.60% with a 3.5% coupon in 2009 to 3.87% with a 5.25% coupon in 2023. Bonds maturing in 2008 were not formally reoffered. The bonds, which are not callable, are rated Aa1 by Moody’s, AAA by Standard & Poor’s, and AA-plus by Fitch.

Wachovia Bank NA priced $33 million of enterprise system revenue bonds for Oak Island, N.C. The bonds mature from 2010 through 2023, with term bonds in 2026, 2027, 2033, and 2035. Yields range from 2.86% with a 4% coupon in 2010 to 4.56% with a 4.375% coupon in 2035. The bonds, which are callable at par in 2018, are insured by MBIA Insurance Corp. Moody’s rates the underlying credit Baa1 and Standard & Poor’s gives it an A-minus.

More economic data is on tap as the week progresses. Today will see the release of initial jobless claims for the week ending Jan. 12, continuing jobless claims for the week ending Jan. 5, and the January Federal Reserve Bank of Philadelphia manufacturing survey. Tomorrow, the preliminary January University of Michigan consumer sentiment index and the December composite index of leading economic indicators will be released.

Economists polled by IFR Markets are predicting 335,000 initial claims, 2.71 million continuing claims, a level of negative 1.3 on the January Philadelphia Fed survey, a reading of 74.7 for the preliminary University of Michigan consumer sentiment index, and a drop of 0.1% in LEI.

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