The municipal market was slightly firmer yesterday. Traders said tax-exempt yields were lower by one or two basis points overall.

"Treasuries were off today, but it didn't have any impact on our market," a trader in Los Angeles said. "There was definitely a solid firm tone today, and we were better probably a basis point or two, though I would say it was more on the two end than the one. Seems like we're poised to finish out this week pretty positively after the weakness we've had in the couple of weeks prior."

Trades reported by the Municipal Securities Rulemaking Board showed gains. A dealer bought from a customer New York's Liberty Development Corp. 5.25s of 2035 at 7.00%, one basis point lower than where they were sold Wednesday. A dealer sold to a customer Houston 5.25s of 2028 at 5.00%, two basis points lower than where they were sold Wednesday. A dealer sold to a customer New Jersey Educational Facilities Authority 5s of 2034 at 5.20%, down two basis points from where they traded Wednesday.

A dealer sold to a customer New York 5s of 2022 at 4.80%, two basis points lower than where they traded Wednesday. A dealer sold to a customer Port Authority of New York and New Jersey 4.75s of 2031 at 5.15%, three basis points lower than where they were sold Wednesday. Bonds from an interdealer trade of Washington 5s of 2023 yielded 4.18%, two basis points lower than where they traded Wednesday.

"We're a little bit better," a trader in New York said. "I wouldn't say we're much better, probably a basis point or two overall, maybe three out long, but we're definitely feeling a bit firmer out there."

The Treasury market mostly showed losses yesterday. The yield on the benchmark 10-year Treasury note, which opened at 2.67%, was quoted near the end of the session at 2.85%. The yield on the two-year note was quoted near the end of the session at 0.96% after opening at 0.89%. The yield on the 30-year bond, which opened at 3.42%, was quoted near the end of the session at 3.59%.

The Treasury Department auctioned $30 billion of five-year notes with a 1 3/4% coupon, a 1.820% high yield, and a price of 99.67. The bid-to-cover ratio was 1.98. Federal Reserve banks bought $1.3 billion for their own account in exchange for maturing securities.

In economic data released yesterday, initial jobless claims for the week ended Jan. 24 came in at 588,000, after a revised 585,000 the previous week. Economists polled by Thomson Reuters had predicted 575,000 initial jobless claims.

Continuing jobless claims for the week ended Jan. 17 came in at 4.776 million, after a revised 4.617 million the previous week. Economists polled by Thomson had predicted 4.650 million continuing jobless claims.

Durable goods orders dropped 2.6% in December after a revised 3.7% decline in November. Economists polled by Thomson had predicted a 2.0% drop.

Excluding transportation, durable goods orders fell 3.6% in December, after a revised 1.7% drop in November. Economists polled by Thomson Reuters had predicted a 2.7% decline.

New home sales came in at 331,000 in December after a revised 388,000 the previous month. Economists polled by Thomson Reuters had predicted 400,000 new home sales.

A slate of additional economic data will be released today. The advance fourth-quarter gross domestic product report is scheduled for release, along with the January Chicago purchasing managers index and the final January University of Michigan consumer sentiment index.

Economists polled by Thomson Reuters are predicting a 5.4% drop in GDP, a 34.0 Chicago PMI reading, and a 61.9 Michigan sentiment index.

In the new-issue market yesterday, Morgan Stanley priced $60.9 million of school building unlimited-tax bonds for Texas' Allen Independent School District. The bonds mature from 2010 through 2030, with a term bond in 2034. Yields range from 0.97% with a 4% coupon in 2010 to 5.38% with a 5.25% coupon in 2034. The bonds, which are callable at par in 2019, are rated Aa3 by Moody's Investors Service and AA by Standard & Poor's.

Morgan Stanley also priced $60.2 million of facilities revenue refunding bonds for the Indiana Finance Authority in two series. Bonds from the $46.3 million Series A mature from 2010 through 2019, with yields ranging from 1.30% with a 3% coupon in 2010 to 3.80% with a 5.25% coupon in 2019. And bonds from the $13.8 million Series B mature in 2012 and 2013, yielding 2.13% and 2.37% respectively, both with 5% coupons. None of the bonds are callable. The credit is rated Aa2 by Moody's, AA-plus by Standard & Poor's, and AA by Fitch Ratings.

The Wyandotte County, Kan., Unified Government competitively sold $20 million of municipal temporary notes to Janney Montgomery Scott LLC with a true interest cost of 2.21%. The notes mature in 2010, with a 2% coupon. The notes were not formally re-offered. The credit is rated SP-1-plus by Standard & Poor's.

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