The municipal market was mixed yesterday. Traders said firmness seen on short and intermediate maturities is being offset by weakness on the long end of the curve.

"It's not overly busy. We're moving some blocks of bonds out long," a trader in New York said. "That's where they can get 5%. Things are cheapening up out there, just because people are going in to a buy a block, and you should give something up if you're trying to move your full piece of paper. Other than that, we're fairly firm elsewhere on the curve."

The Treasury market showed gains yesterday. The yield on the benchmark 10-year Treasury note, which opened at 3.60%, finished at 3.44%. The yield on the two-year note was quoted near the end of the session at 1.60% after opening at 1.75%.

"There wasn't much of a response in munis to the Treasury pop," a trader in Los Angeles said. "A lot of people out there are still worried, and still have capital issues. Bidding is still fairly thin, even for higher grade stuff. I think there are a few new deals out there that did well, but I think the secondary is pretty slow. I would say there's no change to the scale."

In the new-issue market yesterday, Bear, Stearns & Co. priced for retail investors $1 billion of power supply revenue bonds for the California Department of Water Resources. The bonds will be priced for institutional investors today. Portions of the deal will be insured by Financial Security Assurance Inc. Early details about the deal did not include the insurance. The underlying credit is rated A by Standard & Poor's and A-plus by Fitch Ratings.

Meantime, the Port Authority of New York and New Jersey competitively sold $700 million of consolidated bonds in two series. A $350 million taxable series was sold to Lehman Brothers, with a true interest cost of 5.85%. Those bonds mature from 2013 through 2018, with a term bond in 2027. Yields range from 4.14% with a 4.125% coupon in 2013 to 6.48% with a 6.4% coupon in 2027. Those bonds are callable at par in 2018.

A $350 million series subject to the alternative minimum tax was sold to Goldman, Sachs & Co. Those bonds mature in 2023, 2038, and 2035. Bonds maturing in 2023 yield 5.35% with a 5.25% coupon. All remaining bonds were not formally re-offered. These bonds are callable at par in 2018. The credit is rated Aa3 by Moody's Investors Service, and AA-minus by both Standard & Poor's and Fitch.

Morgan Stanley priced $657 million of insured revenue bonds for the California Statewide Communities Development Authority in multiple series. The bonds have maturities ranging from 2008 through 2047, with yields ranging from 2.35% with a 4% coupon in 2008 through 5.12% with a 5.625% coupon in 2047. Portions of the deal are insured by FSA, Financial Guaranty Insurance Co., and MBIA Insurance Corp. The underlying credit is rated Aa3 by Moody's and AA-minus by Standard & Poor's.

The Maryland Transportation Authority competitively sold $573.3 million of facilities projects revenue bonds to Merrill Lynch & Co. with a TIC of 4.93%. The bonds mature from 2012 through 2038 with a term in 2041. Yields range from 2.81% with a 5% coupon in 2012 to 5.05% with a 5% coupon in 2041. Bonds maturing in 2017, from 2024 through 2033, and in 2037 and 2038 were not formally re-offered. Bonds maturing in 2032, from 2034 through 2038, and in 2041 are insured by FSA. The bonds are callable at par in 2018. The underlying credit is rated Aa3 by Moody's, and AA-minus by both Standard & Poor's and Fitch.

Goldman Sachs also priced $142.4 million of water and sewer system revenue bonds for the New York City Municipal Water Finance Authority. The bonds mature from 2008 through 2021 with yields ranging from 2.20% with a 3% coupon in 2009 to 4.37% with a 5% coupon in 2021. The bonds, which are callable at par in 2018, are rated Aa2 by Moody's, AA-plus by Standard & Poor's, and AA by Fitch.

The economic calendar was largely inactive yesterday. However, a slate of economic data will be released later this week. Today, February import prices will be released, along with initial jobless claims for the week ended March 8, continuing jobless claims for the week ended March 1, February retail sales, January business inventories and sales. And tomorrow, the February consumer price index will be released, as will the preliminary March University of Michigan consumer sentiment index.

Economists polled by IFR Markets are predicting a 0.6% uptick in import prices, 358,000 initial jobless claims, 2.835 million continuing jobless claims, a 0.2% increase in retail sales, a 0.2% rise in retail sales excluding autos, a 0.5% jump in business inventories, a 0.3% drop in business sales, a 0.3% uptick in the CPI, a 0.2% increase in the core CPI, and a 69.5 Michigan sentiment reading. q

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