The municipal market was slightly firmer yesterday, as JPMorgan priced for institutional investors California's mammoth $8.8 billion revenue anticipation note transaction.

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

"It's a little bit better," a trader in New York said. "There's some decent activity out there, and we're seeing some gains. We're probably better two, maybe three basis points on the whole."

JPMorgan priced the Ran issue for institutions deal after a second day of retail sales Tuesday. The deal, which is the single-largest note offering so far this year, consists of $3.5 billion of Series A1 notes, which mature May 25, 2010, and were priced to yield 1.25% with a 3% coupon, and $5.3 billion of Series A2 notes, which mature on June 23, 2010, and were priced to yield 1.50% with a 3% coupon.

According to a press release, the deal was oversubscribed, as California took $9.23 billion of total orders, which exceeded the amount by $430 million. Retail investors ordered $6.64 billion, 75.4% of the total amount of the sale. Institutional orders totaled $2.59 billion. The May Ran sale received $696.5 million of retail orders and $2.59 billion of institutional orders, while the June Rans were oversubscribed, with $5.94 billion of orders, all by retail. The $430 million of excess will be taken out of the institutional side, ensuring all retail investors their orders will be filled.

"This is an outstanding result," Treasurer Bill Lockyer said in the release. "The huge demand will allow us to save taxpayers millions of dollars in borrowing costs. And the successful completion of the sale will move California closer to regaining its fiscal balance."

The Rans are rated MIG-1 by Moody's Investors Service, SP-1 by Standard & Poor's, and F1-plus by Fitch Ratings.

Meanwhile, the Federal Open Market Committee yesterday held the federal funds rate target unchanged at a range of 0.00% to 0.25% for the seventh consecutive meeting, and maintained its commitment to leave the rate "at exceptionally low levels ... for an extended period."

In a written report, Guy LeBas, fixed-income strategist at Janney Montgomery Scott LLC, wrote that "even though many indicators of economic conditions are pointing towards the return of positive momentum, Ben Bernanke and his FOMC are still some time away from removal - or even, for that matter, considering the removal - of the extraordinarily expansive monetary policies instituted at the height of the financial crisis."

"We still anticipate that the fed funds rate will remain constrained well into 2010, with the risks being tilted towards a later rather than sooner rate hike," he wrote. "Even so, the numerous emergency liquidity programs will likely begin formally winding down around next February. The Fed struck what can only be described as a conciliatory tone in their policy statement, satisfying economic optimists who were looking for linguistic upgrades as much as three months ago. Still, reading between the lines, Bernanke's outlook remains somewhat more sanguine than a slate of recent data and a three-plus percent GDP run rate for the third quarter might suggest.

"This combination of a slightly positive tone in the face of solid data and a remarkably accommodative policy is challenging to reconcile when viewed in a vacuum," he wrote. "To borrow from the animators over at JibJab, it might seem this policy has more waffles than a house of pancakes, but two factors provide crystal-clear reasoning: one, there's a tail risk of economic relapse triggered by higher credit costs, and two, inflation expectations remain impressively grounded. The first of those factors means that there's an explicit reason not to hike rates at this juncture, while the second indicates that there's no real reason to raise rates."

The Treasury market showed some gains yesterday. The yield on the benchmark 10-year note, which opened at 3.45%, finished at 3.42%. The yield on the two-year note finished at 0.97% after opening at 1.01%, while the yield on the 30-year bond, which opened at 4.19%, finished at 4.18%.

Yesterday, the Municipal Market Data triple-A scale yielded 2.61% in 10 years and 3.57% in 20 years, extending their record lows, following yields of 2.65% and 3.61% Tuesday, respectively.

As of Tuesday's close, the triple-A muni scale in 10 years was at 76.6% of comparable Treasuries, according to MMD. Additionally, 30-year munis were 95.3% of comparable Treasuries. At Tuesday's close, 30-year tax-exempt triple-A general obligation bonds were at 98.1% of the comparable London Interbank Offered Rate.

Elsewhere in the new-issue market yesterday, Barclays Capital priced $259 million of debt for the Virginia College Building Authority. Bonds from the $51.6 million Series D mature from 2011 through 2017, with yields ranging from 0.68% with a 5% coupon in 2011 to 2.46% with a 5% coupon in 2017. Bonds from the $132.7 million Series E-1 mature from 2015 through 2024, with yields ranging from 2.00% with a 5% coupon in 2015 to 3.31% with a 5% coupon in 2024.

Bonds from the $74.7 million Series E-2 mature from 2011 through 2023, with yields ranging from 0.68% with a 3% coupon in 2011 to 3.22% with a 5% coupon in 2023. The bonds, which are not callable, are rated Aa1 by Moody's, AA-plus by Standard & Poor's, and AA-plus by Fitch.

Pricing information was released on Jefferies & Co.'s Tuesday's sale of Ohio GOs, which was upsized to $543.8 million from an originally planned $252.4 million. Bonds from the larger $254 million series mature in 2010 and from 2013 through 2020, with yields ranging from 1.625% with a 2% coupon in 2013 to 3.11% with a 5% coupon in 2020.

Bonds maturing in 2010 were not formally re-offered. Bonds from a $243.3 million series mature from 2013 through 2020, with yields ranging from 1.625% with a 4% coupon in 2013 to 3.11% with a 5% coupon in 2020.

Bonds from a $33.4 million series mature from 2012 through 2019, with yields ranging from 1.25% with a 2% coupon in 2012 to 2.99% with a 5% coupon in 2019. Bonds from a $4.7 million series mature from 2013 through 2015, with yields ranging from 1.625% with a 4% coupon in 2013 to 2.22% with a 5% coupon in 2015. None of the bonds are callable.

The credit is rated Aa2 by Moody's, AA-plus by Standard & Poor's, and AA by Fitch.

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