The municipal market was slightly firmer yesterday as the week's largest new issue was priced in the primary.

Traders said tax-exempt yields were lower by two or three basis points overall.

"We're a little bit firmer, but not incredibly so," a trader in San Francisco said. "Most of the activity is out long, and we're pretty flat on the short end. Maybe a basis point or two better inside of 20 years. But out long, we're better two or three basis points, I've even seen a couple trades that were four [basis points] better."

In the new-issue market yesterday, Barclays Capital priced $950 million of general obligation bonds for the Los Angeles Unified School District in three series. Bonds from the $250 million Series D mature from 2009 through 2027, with term bonds in 2029 and 2034 and a split maturity in 2010. Yields range from 1.40% with a 2.5% coupon in July 2010 to 5.35% with a 5% coupon in 2034. Bonds maturing in 2009 and Jan. 2010 will be decided via sealed bid.

Bonds from the $550 million Series I mature from 2009 through 2027, with term bonds in 2029 and 2034 and a split maturity in 2010. Yields range from 1.40% with a 2.5% coupon in July 2010 to 5.35% with a 5% coupon in 2034. Bonds maturing in 2009 and Jan. 2010 will be decided via sealed bid. Bonds from the $150 million Series F mature from 2009 through 2027, with term bonds in 2029 and 2034. Yields range from 1.40% with a 4% coupon in 2010 to 5.35% with a 5% coupon in 2034. All the bonds are callable at par in 2019 and are rated Aa3 by Moody's Investors Service and AA-minus by Standard & Poor's.

Trades reported by the Municipal Securities Rulemaking Board showed gains. A dealer sold to a customer Illinois 5s of 2022 at 4.02%, down two basis points from where they traded Tuesday. A dealer sold to a customer California 4.5s of 2026 at 5.16%, two basis points lower than where they were sold Tuesday. A dealer sold to a customer Texas 5.25s of 2035 at 4.90%, three basis points lower than where they were sold Tuesday.

Bonds from an interdealer trade of Minnesota 5s of 2027 yielded 4.55%, three basis points lower than where they traded Tuesday. A dealer sold to a customer insured San Diego Unified School District 5.125s of 2022 at 2.14%, down two basis points from where they traded Tuesday. A dealer sold to a customer Nevada's Clark County School District 5s of 2027 at 5.11%, three basis points lower than where they were sold Tuesday.

"We're doing a little better, but not much," a trader in New York said. "It's flat pretty much the whole short end and in most of the intermediate maturities, but out long, we're better a couple of basis points."

The Treasury market was mixed yesterday. The yield on the benchmark 10-year Treasury note, which opened at 2.89%, finished at 2.92%. The yield on the two-year note was quoted near the end of the session at 0.98% after opening at 0.96%. The yield on the 30-year bond, which opened at 3.68%, was quoted near the end of the session at the 3.66%.

In other new-issue market activity, Richland County, S.C., School District No. 2 competitively sold $70 million of GOs to JPMorgan with a true interest cost of 3.50%. The bonds mature from 2013 through 2023. None of the bonds were formally re-offered. The bonds, which are callable at par in 2019, are rated Aa3 by Moody's, AA by Standard & Poor's, and AA-minus by Fitch Ratings.

Western Kentucky University competitively sold $46.9 million of general receipts bonds to Wachovia Bank NA with a TIC of 4.37%. The bonds mature from 2009 through 2028, with yields ranging from 0.85% with a 5% coupon in 2009 to 4.88% with a 4.625% coupon in 2029. Bonds maturing in 2017, 2018, and from 2024 through 2026 were not formally re-offered. The bonds, which are callable at par in 2018, are insured by Assured Guaranty Corp. The underlying credit is rated Aa2 by Moody's and AAA by Standard & Poor's.

Franklin County, Ohio, competitively sold $42.2 million of refunding bonds to Wachovia with a TIC of 2.74%. The bonds mature from 2009 through 2020, with yields ranging from 1.82% with a 4% coupon in 2014 to 3.26% with a 5% coupon in 2020. Bonds maturing from 2009 through 2013 and in 2016 were not formally re-offered. The bonds, which are callable at par in 2018, are rated triple-A by both Moody's and Standard & Poor's.

Knoxville, Tenn., competitively sold $40 million of electric system revenue bonds to Wachovia with a TIC of 4.03%. The bonds mature from 2011 through 2029, with yields ranging from 1.38% with a 5% coupon in 2011 to 4.75% with a 4.5% coupon in 2028. Bonds maturing in 2029 were not formally re-offered. The bonds, which are callable at par in 2018, are rated Aa3 by Moody's and AA-plus by Standard & Poor's.

In economic data released yesterday, the Institute for Supply Management's non-manufacturing business activity composite index was 42.9 in January, up from 40.1 in December. Economists polled by Thomson Reuters had expected a 39.0 level.

Later this week, more economic data will be released, culminating tomorrow with the release of the January non-farm payrolls report. Initial jobless claims for the week ended Jan. 31 will be released today, along with continuing jobless claims for the week ended Jan. 24, preliminary fourth-quarter non-farm productivity, preliminary fourth-quarter unit labor costs, and December factory orders.

Economists polled by Thomson Reuters are predicting that 524,000 jobs were lost in January. They are also predicting 583,000 initial jobless claims, 4.800 million continuing jobless claims, a 1.1% gain in productivity, a 2.9% climb in unit labor costs, a 3.0% drop in factory orders, and a 4.5% decline in factory orders excluding transportation.

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