The municipal market was again firmer yesterday. Traders said tax-exempt yields were lower by about five or six basis points overall.

"We're kind of picking up where we left off yesterday," a trader in New York said. "There's still a good degree of firmness out there, still seeing people getting things done. We're handling the new-issue supply well, and there's some decent demand out there, so there's definitely a positive tone in the market."

Michael Pietronico, chief executive officer at Miller Tabak Asset Management, said that the "first wave of supply in January is generally very well received."

"Our concern would be, where is the demand going to be in the last week of January or the first week of February, relative to the amount of supply?" he said. "And from our perspective, we're concerned that there's going to be a bit of a retracing from this rally because as absolute yields drop, and they are, the demand component will fall alongside, just as supply picks up.

"I think the end of the month is when the supply-demand component of the market is going to be more out of whack and essentially favor those who have waited to invest," Pietronico added. "Because it's been often said that January purchases are December tax law sales, and I think a lot of investors need to be careful about jumping in here at these yield levels, because there's a long year ahead with a lot of supply coming."

Trades reported by the Municipal Securities Rulemaking Board showed gains yesterday. A dealer sold to a customer New York City Transitional Finance Authority 5s of 2030 at 5.02%, down six basis points from where they traded Wednesday. Bonds from an interdealer trade of New York 5s of 2024 yielded 5.07%, three basis points lower than where they were sold Wednesday. A dealer sold to a customer California 5s of 2023 at 5.03%, down four basis points from where they traded Wednesday. A dealer bought from a customer Arizona's Salt River Project Agricultural Improvement and Power District 5s of 2038 at 5.11%, four basis points lower than where they were sold Wednesday.

The Treasury market showed some gains yesterday. The yield on the benchmark 10-year Treasury note, which opened at 2.50%, finished at 2.44%. The yield on the two-year note was quoted near the end of the session at 0.81% after opening at 0.82%. The yield on the 30-year bond, which opened at 3.04%, was quoted near the end of the session at 3.03%.

In the new-issue market yesterday, Citi priced $309 million of educational facilities revenue bonds for the Virginia College Building Authority. The bonds mature from 2009 through 2028, with term bonds in 2033 and 2038. Yields range from 1.79% with a 3% coupon in 2011 to 5.07% with a 5% coupon in 2038. Bonds maturing in 2009 and 2010 were decided via sealed bid. The bonds, which are callable at par in 2018, are rated Aa1 by Moody's Investors Service, AA by Standard & Poor's, and AA-plus by Fitch Ratings.

Morgan Stanley priced $215 million of revenue bonds for the California Educational Facilities Authority. The bonds mature in 2038 and 2039, yielding 5.09% with a 5.25% coupon and 5.12% with a 5% coupon, respectively. The bonds, which are callable at par in 2018, are rated Aa1 by Moody's and AA-plus by Standard & Poor's.

RBC Capital Markets priced $168 million of unlimited-tax school building bonds for Texas' Lewisville Independent School District. The bonds mature from 2011 through 2028, with yields ranging from 2.10% with a 3.5% coupon in 2011 to 5.05% with a 5% coupon in 2028. The bonds, which are callable at par in 2019, are rated AA-plus by Standard & Poor's and AA by Fitch.

Goldman, Sachs & Co. priced $78.7 million of power supply system revenue and refunding bonds for the Municipal Energy Agency of Nebraska. The bonds mature from 2010 through 2024, with term bonds in 2029 and 2039. Yields range from 1.30% with a 5% coupon in 2010 to 5.42% with a 5.375% coupon in 2039. The bonds, which are callable at par in 2019, are insured by Berkshire Hathaway Assurance Corp. The underlying credit is rated A2 by Moody's and A by Standard & Poor's.

Chattanooga, Tenn., competitively sold $45.4 million of general obligation bonds to Morgan Keegan & Co. with a true interest cost of 3.82%. The bonds mature from 2009 through 2028, with yields ranging from 3% in 2009 to 4.625% in 2028. None of the bonds were formally re-offered. The bonds, which are callable at par in 2018, are rated AA-plus by Standard & Poor's and AA by Fitch.

In economic data released yesterday, initial jobless claims came in at 467,000 for the week ended Jan. 3 after a revised 491,000 the previous week. Economists polled by Thomson Reuters had predicted 540,000 initial jobless claims.

Continuing jobless claims for the week ended Dec. 27 came in at 4.611 million, after a revised 4.510 million the previous week. Economists polled by Thomson had predicted 4.500 million continuing jobless claims.

A slate of additional economic data will be released today, led by the December non-farm payrolls report. November wholesale inventories and November wholesale sales will also be released. Economists polled by Thomson are predicting a 500,000 plunge in payrolls, a 7.0% jobless rate, and an 0.8% drop in wholesale inventories.

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