The municipal market was slightly weaker yesterday, following Treasuries.

"There's not a whole lot going on, and with the Treasury market off, it's sort of a tough market out there right now," a trader in New York said. "I don't suppose I'll be able to sell anything I marked up [Tuesday]. A lot of guys out there are bigger sellers than buyers right now. We're off probably about two basis points."

"It's pretty quiet, people are getting scared of their own shadows," a trader in Chicago added. "We're sort of neutral right now. People have been grasping for high-grade paper."

The Treasury market showed losses yesterday. The yield on the benchmark 10-year Treasury note, which opened at 3.82%, finished at 3.94%. The yield on the two-year note was quoted near the end of the session at 2.44% after opening at 2.37%.

"It's been pretty quiet, but the market eroded a fair amount," a trader in Los Angeles said. "Retail buyers are sort of distracted with all the stuff in the newspaper, they don't want to invest."

In economic data released yesterday, the consumer price index rose 1.1% in June after a 0.6% rise the previous month. Economists polled by IFR Markets had predicted an 0.8% gain. The core CPI climbed 0.3% in June after a 0.2% increase the previous month. Economists polled by IFR had predicted a 0.2% uptick.

Industrial production in the nation was up 0.5% in June while capacity utilization rose to 79.9. The rise in production level followed a 0.2% decrease the previous month, while May capacity use was a revised 79.6. IFR had forecast a flat reading for production, and a 79.3% level for capacity utilization.

Federal Reserve Board chairman Ben Bernanke continued his two-day semiannual testimony before Congress, which began Tuesday, speaking before the House Financial Services Committee yesterday. He reiterated what he said to the Senate Banking Committee Tuesday, that while the direction of interest rates is unclear, helping financial markets return to normalcy is a top priority.

In the new-issue market yesterday, Maryland competitively sold $415 million of general obligation bonds to Banc of America Securities LLC at a TIC of 3.86%. The bonds mature from 2011 through 2023, with yields ranging from 3.00% with a 5% coupon in 2013 to 4.12% with a 5% coupon in 2023. Bonds maturing in 2011, 2012, 2014, and 2015 were not formally re-offered. The bonds, which are callable at par in 2018, are rated triple-A by all three major ratings agencies.

Depfa First Albany Securities LLC priced $334.9 million of second general-resolution revenue bonds for the New York City Municipal Water Finance Authority. The bonds mature from 2013 through 2022, with yields ranging from 3.00% with a 3.25% coupon in 2013 to 4.28% with a 5% coupon in 2022. The bonds, which are callable at par in 2018, are rated Aa3 by Moody's Investors Service, AA-plus by Standard & Poor's, and AA by Fitch Ratings.

Nevada competitively sold $273.1 million of general obligation capital improvement and cultural affairs bonds to Merrill Lynch & Co. with a TIC of 4.36%. The bonds mature from 2013 through 2027, with yields ranging from 3.61% with a 5% coupon in 2016 to 4.48% with a 5% coupon in 2026. Bonds maturing from 2013 through 2015 and in 2027 were not formally re-offered. The bonds, which are callable at par in 2018, are rated Aa1 by Moody's and AA-plus by Standard & Poor's and Fitch.

JPMorgan priced $213.5 million of special obligation refunding bonds for Kansas City, Mo., in two series. Bonds from the larger $195.7 million series mature from 2009 through 2023, with term bonds in 2028, 2033, 2038, and 2040. Yields range from 2.07% with a 4% coupon in 2009 to 5.53% with a 5.25% coupon in 2040. The bonds, which are callable at par in 2018, are rated A2 by Moody's, AA-minus by Standard & Poor's, and AA by Fitch. The deal also contains a $17.8 million taxable series, which matures in 2018 and 2040.

Raymond James & Co. priced $110.5 million of revenue refunding bonds for Florida's North Brevard County Hospital District. The bonds mature from 2009 through 2018, with term bonds in 2028, 2038, and 2043. Yields range from 2.87% with a 3.5% coupon in 2009 to 5.95% with a 5.75% coupon in 2043. The bonds, which are callable at par in 2018, are rated A by Standard & Poor's and A-plus by Fitch.

Stephens Inc. priced $75 million of single-family mortgage revenue bonds for the Arkansas Development Finance Authority in two series. Bonds from the $13.4 million series A, which is not subject to the alternative minimum tax, matures from 2009 through 2018, with a term bond in 2033. Bonds maturing in 2013, 2016, 2017, and 2018 are priced at par, with 3.45%, 3.8%, 3.95%, and 5% coupons, respectively. All remaining bonds were not formally re-offered.

Bonds from the $61.6 million series B, which is subject to the AMT, matures from 2009 through 2011, with term bonds in 2013, 2016, 2018, 2019, 2023, 2028, 2033, and 2038. Yields range from 3.05% priced at par in 2009 to 5.70% priced at par in 2038. Some bonds maturing in 2009, and all bonds maturing in 2010, and 2011 were not formally re-offered. All bonds are callable at par in 2018. The credit is rated AAA by Standard & Poor's.

RBC Capital Markets priced $60 million of residential housing finance bonds for the Minnesota Housing Finance Agency in two series. Bonds from the $25.1 million series A, which is not subject to the AMT, matures from 2009 through 2019, with a term bond in 2023. Yields range from 1.85% priced at par in 2009 to 4.60% priced at par in 2023. Bonds from the $34.9 million series B, which is subject to the AMT, matures in 2028 and 2033, yielding 5.45% and 5.60%, respectively, both priced at par. The bonds, which are callable at par in 2018, are rated AA-plus by Standard & Poor's.

Finally Fairfield, Conn., competitively sold $28.4 million of GOs to Morgan Stanley with a TIC of 3.89%. The bonds mature from 2009 through 2028, with coupons ranging from 3.125% in 2009 to 4.125% in 2028. None of the bonds were formally re-offered. The bonds, which are callable at par in 2018, are rated triple-A by all three major rating agencies.

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