The municipal market firmed yesterday, following gains in Treasuries.

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

"It's up a couple of basis points, but we're still lagging Treasuries," a trader in Chicago said. "The focus right now is with the new issues. We're definitely not seeing as much volatility as Treasuries."

"There is a good amount of activity out long, and munis were better by three basis points out there," a trader in Los Angeles added. "Overall this was a relatively busy trading day with a lot different participants taking interest in the market."

The Treasury market showed gains yesterday. The yield on the benchmark 10-year Treasury note, which opened at 3.67%, finished at 3.59%. The yield on the two-year note was quoted near the end of the session at 2.21% after opening at 2.31%. The yield on the 30-year Treasury finished at 4.18% after opening at 4.27%.

In the new-issue market yesterday, Citi priced $609 million of revenue refunding bonds for the North Texas Tollway Authority in two series. Bonds from the $409 million series mature in 2042 and 2043, yielding 4.48% and 4.08%, respectively, both with 5% coupons. The bonds are not callable. Bonds from the $200 million series of convertible capital appreciation bonds mature in 2042 and 2043. The bonds are callable at par in 2025. The bonds are rated A2 by Moody's Investors Service and A-minus by Standard & Poor's.

JPMorgan priced $460.8 million of revenue bonds for the Dormitory Authority of the State of New York. The bonds in the $72.5 million Series 2003C-2 mature from 2011 through 2026, with yields ranging from 2.55% in 2011 to 4.80 in 2026, all priced at par. The bonds, which are callable at 101 in 2017, declining to par in 2018, are rated AA-minus by Standard & Poor's and A-plus by Fitch Ratings.

JPMorgan also priced $452.3 million of hospital revenue bonds for Ohio. The bonds mature from 2012 through 2029, with term bonds in 2033, 2038, and 2043. Yields range from 3.35% with a 4% coupon in 2012 to 5.55% with a 5.5% coupon in 2043. The bonds, which are callable at par in 2018, are rated Aa2 by Moody's and AA-minus by Standard & Poor's.

Morgan Stanley priced $400 million of education loan revenue bonds for the Massachusetts Educational Financing Authority, subject to the alternative minimum tax. The bonds mature in 2022 and 2030, yielding 6.125% and 6.35%, respectively, both priced at par. The bonds, which are callable at par in 2018, are insured by Assured Guaranty Corp. The underlying credit is rated A1 by Moody's and AA by both Standard & Poor's and Fitch.

Mississippi competitively sold about $240 million of tax-exempt and taxable general obligation bonds, over two series. The $133.5 million tax-exempt series was sold to Lehman Brothers with a true interest cost of 4.18%. The bonds mature from 2009 through 2028, with yields ranging from 2.10% with a 5% coupon in 2010 to 4.50% with a 5% coupon in 2028. Bonds maturing in 2009 were not formally re-offered. Those bonds are callable at par in 2018.

In addition, the $96.6 million taxable series was sold to Raymond James & Associates with a TIC of 5.17%. The bonds mature from 2009 through 2023, with yields ranging from 3.15% with a 5.25% coupon in 2009 to 5.31% with a 5.2% coupon in 2023. The bonds are also callable at par in 2018. The credit is rated Aa3 by Moody's and AA by Standard & Poor's and Fitch.

Merrill Lynch & Co. priced $161.9 million of revenue bonds for the Missouri Health and Educational Facilities Authority. The bonds mature from 2022 through 2025, with term bonds in 2029, 2033, and 2039. Yields range from 5.17% with a 5% coupon in 2022 to 5.76% with a 5.5% coupon in 2039. The bonds, which are callable at par in 2018, are rated A2 by Moody's and A by Fitch.

Citi priced $100 million of revenue bonds for the Florida Housing Finance Corp. The bonds mature from 2010 through 2018, with term bonds in 2023, 2028, 2033, and 2039. Yields range from 2.40% in 2010 to 5.50% in 2039, all priced at par. The bonds, which are callable at par in 2018, are rated Aa1 by Moody's and AA-plus by Standard & Poor's and Fitch.

Lehman Brothers priced $51.9 million of civic facility revenue bonds for the Oneida County, N.Y., Industrial Development Authority. The bonds mature from 2009 through 2028, with a term bond in 2032. Yields range from 1.65% with a 5% coupon in 2009 to 4.71% with a 5% coupon in 2032. The bonds, which are callable at par in 2018, are rated Aa2 by Moody's.

In economic data released yesterday, pending home sales decreased to a reading of 86.5 in July from an upwardly revised 89.4 in June. IFR Markets' poll of economists had predicted an 88.6 reading.

Merchant wholesalers posted a 1.4% increase in inventories in July, while sales dipped 0.3% in the month. Inventories of merchant wholesalers grew to $441.3 billion, following a downwardly revised 0.9% increase to $435.1 billion in June.

Meanwhile, sales of merchant wholesalers slid to about $410.6 billion, following June's revised 3.0% increase to $412.0 billion. Economists polled by IFR Markets predicted a 0.7% increase in wholesale inventories, and 1.5% growth in wholesale sales.

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