The municipal market was firmer by about two or three basis points overall Thursday amid light to moderate secondary trading activity.

“The market is still feeling good,” a trader in Chicago said. “We are up a few ticks. People are feeling good about it, but there isn’t a lot coming, so people are pressured to reinvest. People have been given an edict that when bonds roll over into munis, they are supposed to reinvest. There is a lot left from June and then July. And they need to get reinvested, but there isn’t a whole lot coming. It is the Fourth of July weekend, so its pretty usual. When the calendar picks up in mid-July, the market is going to be tighter than you want it to be.”

“Plus, we look good vis-à-vis the Treasury market,” the trader said. “There is every reason for our market to do OK in here. Even if Treasuries back off a bit, we are still going to do OK. And it is a market of names as well. Some will trade better than others, some will trade more reluctantly. Overall, the market is in good shape, it is moving up, and I am mildly bullish in here for the next few days.”

A trader in Los Angeles attributed the recent decline in muni yields to the “pop in Treasuries” in the past few days.

“We are still underperforming [the Treasury market] though,” the trader said. “Yields are, on a relative basis, still attractive so that everyone has to bump up the scale. It’s definitely up for high-grade paper, there is a good appetite for it, and for good revenue bond paper. People still seem to be a little scared of the creditworthiness of [general obligation debt], schools, and various municipality credits, but all the liquid names are trading very well.”

The Treasury market mostly showed losses Thursday. The benchmark 10-year note finished at 2.94%, after opening at 2.93%. The 30-year bond finished at 3.88% after opening at 3.89%. The two-year note finished at 0.64% after opening at 0.60%.

The Municipal Market Data triple-A scale yielded 2.76% in 10 years and 3.73% in 20 years yesterday, following levels of 2.79% and 3.75% Wednesday. The scale yielded 4.01% in 30 years yesterday, matching 4.02% Wednesday.

Wednesday’s triple-A muni scale in 10 years was at 94.9% of comparable Treasuries and 30-year munis were at 103.1%, according to MMD, while 30-year tax-exempt triple-A general obligation bonds were at 108.4% of the comparable London Interbank Offered Rate.

In the new-issue market yesterday, Wells Fargo Securities priced $425 million of tax and revenue anticipation notes for the Philadelphia School District.

The Trans mature in June 2011, yielding 1.25% with a 2.5% coupon.

The credit is rated MIG-1 by Moody’s Investors Service and SP-1 by Standard & Poor’s.

Final pricing information also was released for the New York Metropolitan Transportation Authority’s $510.5 million sale of taxable and tax-exempt debt, including $467.7 million of taxable Build America Bonds. Barclays Capital priced the transaction late Wednesday.

The BABs mature from 2016 through 2021, with term bonds in 2026, 2030, and 2040. Yields range from 4.276% in 2016, or 2.78% after the 35% federal subsidy, to 6.687% in 2040, or 4.35% after the subsidy, all priced at par.

The bonds were priced to yield between 183 and 275 basis points over the comparable Treasury yields, and contain a make-whole call at Treasuries plus 45 basis points.

The deal also consisted of $42.8 million of tax-exempt transportation revenue bonds, which mature from 2011 through 2015, with yields ranging from 1.00% with a 2% coupon in 2011 to 2.49% with a 5% coupon in 2015.

These bonds were not callable.

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

In economic data released Thursday, initial jobless claims increased to 472,000 for the week ending June 26, exceeding economists’ estimates, as the four-week moving average for initial claims climbed to the highest level since March.

Continuing claims increased to 4.616 million for the week ending June 19, up from 4.573 million in the week earlier.

Economists expected 450,000 initial claims and 4.54 million continuing claims, according to the median estimate from Thomson Reuters.

Construction spending in May declined 0.2%, less than economists’ estimated and the first decline since February.

April’s construction spending was revised lower to a 2.3% increase from 2.7% reported last month.

Economists expected construction spending would fall 0.8% for the month, according to the median estimate from Thomson Reuters.

The Institute for Supply Management’s monthly report on business reported that the ISM index dipped to 56.2 in June from 59.7 in May.

Economists polled by Thomson Reuters predicted the index would fall to 58.5.

Pending home sales plunged 30.0% to a reading of 77.6 in May from a revised 6.0% increase to 110.9 in April, according to an index released yesterday by the National Association of Realtors.

Thomson Reuters’ poll of economists had predicted a 99.8 reading.

Priti Patnaik contributed to this column.

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