The municipal market was slightly firmer today, as Washington brought to market the week’s largest scheduled bond deal.

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

“It’s somewhat quiet, as there’s not a whole lot going on,” a trader in New York said. “It’s been very hard to get retail customers involved, as you’re lucky to get 3% even at 2010 or 2011. To get 4%, you have to go out to 2020 or 2021, and it’s not worth it to most people. We could be waiting a while for that to come down, too.”

In the new-issue market yesterday, Washington competitively sold $921 million of general obligation bonds in two series. Bonds in the larger series, $546.2 million, are various purpose, and were sold to Merrill Lynch & Co. at a true interest cost of 4.31%. The bonds mature from 2009 through 2030 with a term bond in 2033. Yields range from 3.70% with a 5% coupon in 2019 to 4.02% with a 5% coupon in 2024. Bonds maturing from 2009 through 2018, in 2020, 2021, and from 2025 through 2033 were not formally re-offered. The bonds are callable at par in 2018, and are rated Aa1 by Moody’s Investors Service, AA-plus by Standard & Poor’s, and AA by Fitch Ratings.

Among all 5% coupon paper in the series, bonds maturing in 2019 were tightest to Monday’s Municipal Market Data triple-A yield curve, with yields 15 basis points over the curve. Bonds maturing from 2022 through 2024 were widest to the scale, with yields 17 basis points over.

Bonds in the smaller series, $375 million, are motor vehicle fuel-tax bonds, and were sold to Citi with a TIC of 4.31%. The bonds mature from 2009 through 2030, with term bonds in 2033. Yields range from 3.75% with a 5% coupon in 2020 to 4.24% with a 5% coupon in 2030. Bonds maturing from 2009 through 2019, from 2024 through 2028, and in 2033 were not formally re-offered.

Among all 5% coupon paper in the series, bonds maturing in 2029 and 2030 were tightest to that day’s MMD triple-A yield curve, with yields 13 basis points over the curve. Bonds maturing from 2020 through 2023 were widest to the scale, with yields 14 basis points over.

The state last came to market in September with two series of bonds totaling $900 million. Moody’s rated those bonds Aa1, while Standard & Poor’s and Fitch each assigned a rating of AA. JPMorgan won the larger series, $512.9 million of GOs, with a true interest cost of 4.64%. Bonds in the series mature from 2013 through 2032.

Among all 5% coupon paper in the series, bonds maturing from 2016 through 2025 were tightest to that day’s MMD triple-A yield curve, with yields 11 basis points over the curve. Bonds maturing from 2030 through 2032 were widest to the scale, with yields 13 basis points over.

JPMorgan also won the smaller series, $387 million of motor vehicle fuel tax GOs, with a TIC of 4.61%. Bonds in the smaller series mature from 2009 through 2030 with a term bond in 2032. Financial Security Assurance Inc. insures bonds maturing in 2016, 2017, 2024, and 2025; Ambac Assurance Corp. insures bonds maturing in 2018 through 2023; and MBIA Insurance Corp. insures bonds maturing in 2029, 2030, and 2032.

Of the series’ uninsured, 5% coupon paper, bonds maturing in 2010 were tightest to that day’s MMD triple-A yield curve, with yields five basis points over the curve. Bonds maturing from 2026 through 2028 were widest to the scale, with yields 13 basis points over.

Trades reported by the Municipal Securities Rulemaking Board yesterday showed gains on some trades. Bonds from an interdealer trade of insured Connecticut Health and Educational Facilities Authority 5s of 2016 yielded 3.49%, one basis point lower than where they were sold Monday. Bonds from an interdealer trade of insured New Jersey Turnpike Authority 5.25s of 2027 yielded 4.15%, even with where they traded Monday. A dealer sold to a customer Maryland 5s of 2009 at 2.81%, down two basis points from where they were sold Monday. Bonds from an interdealer trade of insured California 4.6s of 2040 yielded 4.72%, even with where they traded Monday.

The Treasury market was slightly firmer. The yield on the benchmark 10-year Treasury note, which opened at 3.83%, finished at 3.82%. The yield on the two-year note was quoted near the end of the session at 2.72% after opening at 2.75%.

The economic calendar was light yesterday. Later this week, initial jobless claims for the week ended Jan. 5 and continuing jobless claims for the week ended Dec. 29 will be announced. The same day, November wholesale inventory and November wholesale sales will be released.

Economists polled by IFR Markets are predicting 340,000 initial claims, 2.75 million continuing claims, gains in wholesale inventory of 0.3%, and 0.3% growth in wholesale sales.

In other new-issue market activity, Lehman Brothers priced $279.5 million of revenue bonds for the Maryland Health and Educational Facilities Authority. The bonds mature from 2008 through 2023, with term bonds in 2028, 2034, 2038, 2039, 2042, and 2047. Yields range from 3.05% with a 4.75% coupon in 2008 to 4.88% with a 4.75% coupon in 2047. Bonds maturing from 2019 through 2047 are insured by Assured Guaranty Corp. The underlying credit is rated A2 by Moody’s and A by Standard & Poor’s.

Tacoma, Wash., competitively sold $113.3 million of limited-tax GOs to Merrill Lynch with a TIC of 4.50%. The bonds mature from 2014 through 2030 with term bonds in 2033 and 2038. Yields range from 3.32% with a 5% coupon in 2014 to 4.05% with a 5% coupon in 2024. Bonds maturing from 2025 through 2038 were not formally re-offered. All bonds are insured by FSA. The bonds are callable at par in 2018. The underlying credit is rated Aa3 by Moody’s and AA-minus by Standard & Poor’s.


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