New York City and Pennsylvania came to market yesterday with over $1.6 billion of general obligation debt against a backdrop of another slightly firmer session in the municipal market.

Merrill Lynch & Co. priced $799.9 million of tax-exempt GOs for New York City in two series. Bonds from the $600 million Series J mature from 2011 through 2031, with term bonds in 2033 and 2036. Yields range from 1.62% with a 3% coupon in 2011 to 4.97% with a 5% coupon in 2036. The bonds are callable at par in 2019.

Bonds from the $199.9 million Series K mature from 2010 through 2019, with yields ranging from 1.62% with a 2% coupon in 2011 to 3.76% with a 5% coupon in 2019. Bonds maturing in 2010 will be decided via sealed bid. The bonds are not callable. The credit is rated Aa3 by Moody's Investors Service, AA by Standard & Poor's, and AA-minus by Fitch Ratings.

The city also competitively sold $190 million of taxable GOs to Piper Jaffray & Co., with a true interest cost of 4.82%. The bonds mature from 2013 through 2021, with coupons ranging from 3.35% in 2013 to 5.125% in 2021. None of the bonds were formally re-offered, and they are not callable.

Pennsylvania competitively sold $616.9 million of GOs to JPMorgan in two series. Bonds from the larger $464 million series mature from 2010 through 2029, with yields ranging from 1.32% with a 5% coupon in 2012 to 4.11% with a 4% coupon in 2029. Bonds maturing in 2010 and 2011 were not formally re-offered. The bonds are callable at par in 2019.

Bonds from the smaller $152.9 million series mature from 2009 through 2014, with yields ranging from 1.00% with a 5% coupon in 2011 to 1.92% with a 4% coupon in 2014. Bonds maturing in 2009 and 2010 were not formally re-offered. The bonds are not callable. The credit is rated Aa2 by Moody's and AA by Standard & Poor's and Fitch.

Traders said tax-exempt yields in the secondary market were lower by two or three basis points.

"We actually were seeing a little bit of weakness very early on, but that's evaporated, and we're kind of back to our standard couple of basis points better that we've been seeing pretty consistently the past couple weeks," a trader in New York said. "We were more unchanged than anything in the morning, just a touch of weakness, but now we're solidly firmer, probably two or three basis points better."

A trader in Los Angeles added that most of the firmness is found on the longer end of the curve.

"The short end is actually pretty flat, I'd say completely unchanged," the trader said. "You do have a bit of firmness out past 10 years or so, but the short-end is just flat. There wasn't too much activity today either, it was pretty quiet."

The Treasury market was mixed yesterday. The yield on the benchmark 10-year note, which opened at 3.22%, was quoted near the end of the session at 3.25%. The yield on the two-year note was quoted near the end of the session at 0.89% after opening at 0.91%. The yield on the 30-year bond, which opened at 4.20%, was quoted near the end of the session at the same level.

As of Monday's close, the triple-A muni scale in 10 years was at 87.5% of comparable Treasuries, according to Municipal Market Data. Additionally, 30-year munis were 105.5% of comparable Treasuries. Also, as of the close Monday, 30-year tax-exempt triple-A general obligation bonds were at 117.9% of the comparable London Interbank Offered Rate.

Elsewhere in the new-issue market yesterday, Morgan Stanley priced $200 million of revenue bonds for Whiting, Ind. The bonds mature in 2044, priced at par to yield 2.80%. The bonds contain a mandatory put in 2014, and are not callable. The short-term credit is rated VMIG-1 by Moody's and A-1-plus by Standard & Poor's. The long-term credit is rated Aa1 by Moody's and AA by Standard & Poor's.

JPMorgan also priced $179 million of pollution control revenue bonds for the Arizona Public Service Co. in multiple series. Bonds from the $38.2 million Cholla Project Series A mature in 2034, yielding 5.00% priced at par. Bonds from the $32 million Series B mature in 2034, yielding 5.50% priced at par. Bonds from the $32 million Series C mature in 2034, yielding 5.50% priced at par. Bonds from the $32 million Series D mature in 2034, yielding 5.75% priced at par. Bonds from the $32 million Series E mature in 2034, yielding 5.75% priced at par. Bonds from the $12.8 million Navajo Project Series A mature in 2034, yielding 5.50% priced at par. The bonds, which are not callable, are rated Baa2 by Moody's, BBB-minus by Standard & Poor's, and BBB by Fitch.

In economic data released yesterday, housing starts came in at 458,000 in April, after a revised 525,000 the previous reading. Economists polled by Thomson Reuters had predicted 520,000 housing starts.

Building permits came in at 494,000 in April, after a revised 511,000 the previous reading. Economists polled by Thomson Reuters had predicted 530,000 building permits.

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