The municipal market was unchanged to slightly firmer Tuesday amid light secondary trading activity as New York's Metropolitan Transportation Authority came to market with an upsized $750 million sale of taxable Build America Bonds.

"We're settling into holiday mode in the secondary," a trader in Los Angeles said. "You can pick up a basis point or two here and there, but activity is pretty light and we're mostly unchanged."

In the new-issue market Tuesday, Barclays Capital priced $750 million of taxable BABs for the MTA, upsized from an originally planned $350 million.

The BABs contain a split maturity in 2030 and an additional term maturity in 2040, yielding 6.734% and 7.134% in 2030, or 4.38% and 4.64% after the 35% federal subsidy, and 6.814% in 2040, or 4.43% after the subsidy, all priced at par. The bonds were priced to yield between 225 and 265 basis points over the 30-year Treasury yield.

The credit is rated A2 by Moody's Investors Service, A by Standard & Poor's, and A-plus by Fitch Ratings.

The Municipal Market Data triple-A 10-year scale declined two basis points Tuesday to 3.15%, the 20-year scale decreased two basis points to 4.37%, and the scale for 30-year debt was unchanged at 4.66%.

"There's a bit of a firmer tone, but it's quiet," a trader in New York said. "We're maybe better a basis point or two in spots, but other than that, we're fairly flat."

Tuesday's triple-A muni scale in 10 years was at 95.2% of comparable Treasuries and 30-year munis were at 105.4%, according to MMD.

Meanwhile, 30-year tax-exempt triple-A general obligation bonds were at 113.1% of the comparable London Interbank Offered Rate.

The Treasury market was somewhat mixed Tuesday. The benchmark 10-year note was quoted recently at 3.32% after opening at 3.34%.

The 30-year bond was quoted recently at 4.42% after opening at 4.44%. The two-year note was quoted recently at 0.62% after opening at 0.60%.

Elsewhere in the new-issue market Tuesday, Loop Capital Markets priced $98.5 million of taxable BABs for Texas' Corpus Christi Independent School District.

The bonds mature in 2026, 2027, 2039, and 2032. Yields range from 5.424% in 2026, or 3.53% after the 35% federal subsidy, to 6.124% in 2032, or 3.98% after the subsidy, all priced at par.

The bonds were priced to yield between 95 and 165 basis points over the 30-year Treasury yield.

The bonds, which are subject to a make-whole call at Treasuries plus 30 basis points, are backed by the Texas Permanent School Fund guarantee program. The underlying credit is rated Aa2 by Moody's and AA by Standard & Poor's.

Allegheny County, Pa., competitively sold $50 million of tax and revenue anticipation notes to Boenning & Scattergood at a true interest cost of 0.40%.

The Trans mature in April 2011 with a 1% coupon and were not formally re-offered.

The credit is rated MIG-1 by Moody's.

East Brunswick, N.J., competitively sold $28.4 million of bond anticipation notes to Beneficial Bank, at a net-interest cost of 0.67%.

The Bans mature in Jan. 2012 with a 2% coupon and were not formally re-offered.

Trades reported by the Municipal Securities Rulemaking Board Tuesday showed some gains.

A dealer bought Georgia 4.3s of 2023 from a customer at 3.73%, one basis point lower than where they traded Monday.

A dealer sold to a customer Dormitory Authority of the State of New York 5s of 2024 at 4.50%, even with where they were sold Monday.

Bonds from an interdealer trade of taxable Illinois BAB 5.1s of 2033 yielded 7.50%, one basis point lower than where they traded Monday.

Bonds from an interdealer trade of Kentucky Economic Development Finance Authority 6.375s of 2040 yielded 6.48%, even with were they were sold Monday.

In a commentary, Alan Schankel, managing director at Janney Capital Markets, wrote about Sunday's "60 Minutes" segment on the municipal bond market. The broadcast report featured analyst Meredith Whitney and New Jersey Gov. Chris Christie and was the latest in a series of 2010 stories decrying the financial health of municipal bond issuers.

Schankel noted that Christie said U.S. states face a "day of reckoning" and Whitney predicted 50 to 100 sizable defaults among municipal issuers. He said state and local governments are stressed, primarily due to sharp declines in income, sales and property tax revenues.

"The part of the story missing from most accounts is the action state and local governments are taking to address these challenges, with Gov. Christie's New Jersey showing the way," Schankel wrote. States, counties, cities and towns around the country have tightened belts, and municipal issuers enjoy much more flexibility in addressing budget issues than corporations, which "must compete or die," he added.

"There is no question that 2011 will be a challenging year for many states and municipalities, but defaults on safe sector municipal credits — general obligation and essential purpose issues such as water and sewer revenue bonds — will be few, primarily reflecting isolated situations," Schankel wrote. "As a sector, municipal debt is one of the safest. Historical default and bankruptcy rates are well below those of like rated corporate bonds."

Given the general creditworthiness and financial flexibility of most governmental issuers, he predicted that state and local government "will weather this financial storm well."

The economic calendar was light Tuesday.

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