The municipal market gained after a nearly two-week spell yesterday, with the taxable Build America Bonds issued earlier this week shooting up in sprightly second-day trading.

Traders said the tax-exempt market firmed, especially beyond 10 years. The market had hit a lull recently, with the yield on a triple-A rated, 30-year general obligation bond steadying at 4.58% over the previous three trading days, after gradually pulling back from a 2009 low of 4.35% that it hit April 22, according to Municipal Market Data.

"The market has firmed up," a trader in New Jersey said. "There's not a huge amount of bonds out there, but people are picking through them and trying to find things that look cheap."

In the secondary market, the BABs that came to market Tuesday were also stronger. The Wichita, Kan., Unified School District No. 259 bonds that were priced to yield 6.22% were trading at a weighted average yield of 6.087% yesterday, with trades as low as 5.70%, according to BondDesk's MuniTicker. Sacramento Municipal Utility District bonds that were priced to yield 6.322% were trading at a weighted average yield of 6.177%, an improvement from Tuesday's trading of 6.296%.

Other big BAB issues had traded more than 40 basis points better in secondary trading the day after they priced. The two BAB deals that came to market Tuesday, though, priced tighter to Treasuries than those earlier deals did.

The Treasury market, however, was little changed yesterday. The yield on the benchmark 10-year note, which opened at 3.16%, closed at 3.15%. The yield on the two-year note closed at 0.97% after opening at 0.97%. The yield on the 30-year bond, which opened at 4.07%, closed at 4.08%.

In the new-issue market, Citi priced $420.5 million in electric system revenue bonds for Vernon, Calif., in one of the largest deals of the week. The bonds mature 2009 through 2015, with a term bond in 2021. Yields range from 1.50% with a 2.50% coupon in 2009 to 5.375% with a 5.125% coupon in 2021. The bonds, which are callable at par in 2019, are rated A3 by Moody's Investors Service and A-minus by Standard & Poor's.

On the competitive side, the Port Authority of New York and New Jersey sold to Merrill Lynch & Co. $100 million of consolidated bonds at a true interest cost of 4.7925%. None of the bonds were reoffered.

Elsewhere, Merrill released final pricing details on a $454 million Georgia offering that was upsized to include a $149.7 refunding portion. Bonds in the $305 million series mature 2010 through 2028, with yields ranging from 0.45% with a 2% coupon in 2010 to 4.25% with a 4% coupon and 5% coupon in 2029. The bonds, which are triple-A rated, are callable at par in 2019. The offering also included a $9.5 million issue.

Bonds in the $149.7 refunding portion mature 2010 through 2018, with a term bond in 2020. Yields range from 0.43% with a 2% coupon in 2010 to 3.25% with a 5% coupon in 2020.

The economic calendar was light yesterday. Data still to be released this week includes first-quarter productivity today and the April unemployment rate and nonfarm payroll numbers tomorrow.

Economists polled by IFR Markets are expecting a 0.6% gain in productivity for the first quarter of 2009. They predict nonfarm payrolls will fall 620,000 for April.

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