The municipal market was mixed yesterday, while the Indianapolis Local Public Improvement Bond Bank came to market with more than $550 million of debt."It's pretty quiet," a trader in New York said. "Supply is pretty awful, and not getting any better. It's just a summertime calendar, not that wonderful. We're mostly flat, but it's maybe cheaper a basis point or two on the long end."

"We're mostly flat, but maybe even a touch firmer in some spots," a trader in Los Angeles said. "Mostly on sort of the shorter end, and it's maybe even a touch weaker out long. Overall, I think we're pretty unchanged."

In the new-issue market yesterday, Morgan Stanley priced $553.7 million of bonds for the Indianapolis Local Public Improvement Bond Bank. The bonds mature from 2011 through 2024, with term bonds in 2029 and 2038. Yields range from 2.07% with a 3% coupon in 2011 to 6.00% with a 5.75% coupon in 2038. The bonds are callable at par in 2019. Most of the bonds are insured by Assured Guaranty Corp. Portions of bonds maturing in 2011, 2012, 2013, 2029, and 2038 were uninsured. The underlying credit is rated A3 by Moody's Investors Service, AA-minus by Standard & Poor's, and A-minus by Fitch Ratings.

The Treasury market was somewhat mixed yesterday. The yield on the benchmark 10-year note, which opened at 3.69%, was quoted near the end of the session at 3.67%. The yield on the two-year note was quoted near the end of the session at 1.18% after opening at 1.12%. The yield on the 30-year bond, which opened at 4.55%, was quoted near the end of the session at 4.51%.

The Treasury Department auctioned $39 billion of five-year notes, with a 2 5/8% coupon, a 2.69% high yield, and a price of 99.70. The bid-to-cover ratio was 1.92. Federal Reserve banks bought $977 million for their own account in exchange for maturing securities.

John Canavan, debt strategist at Stone & McCarthy Research in New Jersey, said most of yesterday's movement in the Treasury market took place "after the auction underperformed."

"Prices across the curve were hit lower on the poor reception found on the five-year note auction today," hesaid. "We have seen a nice bounce back of the curve since the sell off on the five-year. There were also some gains overnight on a weak Chinese equity market."

As of Tuesday's close, the triple-A muni scale in 10 years was at 81.9% of comparable Treasuries, according to Municipal Market Data. Thirty-year munis were 102.8% of comparable Treasuries. As of Tuesday's close, 30-year tax-exempt triple-A general obligation bonds were at 108.5% of the comparable London Interbank Offered Rate.

In economic data released yesterday, durable goods orders fell 2.5% in June, after a revised 1.3% gain the previous month. Economists polled by Thomson Reuters had predicted a 0.6% decline. Excluding transportation, durable goods orders rose 1.1% in June, after a revised 0.8% gain the prior month. Economists polled by Thomson had predicted no change.

"The decline is due to civilian aircraft orders," said Joel Naroff, president of Naroff Economic Advisors. "This contributed to 60% of the decline. In May there was a 60% increase in aircraft orders. In June there was a 40% decrease in the orders. A large part of the decline is a normal variability of aircraft orders."

Elsewhere in the new-issue market yesterday, JPMorgan priced $211.9 million of state revolving fund refunding bonds for the Massachusetts Water Pollution Abatement Trust. The bonds mature from 2010 through 2029, with yields ranging from 0.75% with a 3% coupon in 2011 to 4.30% with a 4.2% coupon in 2029. Bonds maturing in 2010 were decided via sealed bid. The bonds, which are callable at par in 2019, are rated triple-A by all three major ratings agencies.

Merrill Lynch & Co. priced $191.6 million of unlimited tax schoolhouse bonds for Texas' Cypress-Fairbanks Independent School District. The taxable bonds mature in 2031 and 2038, yielding 6.53% and 6.63%, respectively, both priced at par. The bonds were priced to yield 200 and 210 basis points over the comparable Treasury yields, respectively. The bonds, which are callable at par in 2019, are rated Aa3 by Moody's and AA-minus by Standard & Poor's and Fitch.

JPMorgan priced $158.7 million of bonds for the Oakland Unified School District, which includes $70.8 million of taxable Build America Bonds. The Series B taxable BABs mature in 2034, but were not formally re-offered. They are callable at par in 2019.

Bonds from the $87.9 million tax-exempt Series A mature from 2013 through 2024, with a term bond in 2039. Yields range from 3.38% with a 4% coupon in 2013 to 6.27% with a 6.25% coupon in 2029. These bonds are also callable at par in 2019. The credit is rated Baa1 by Moody's and BBB-plus by Standard & Poor's.

JPMorgan priced for retail investors $102.6 million of residential mortgage revenue bonds for the Texas Department of House and Community Affairs in two series. Bonds from the $80 million Series A, which is not subject to the alternative minimum tax, mature from 2011 through 2019, with term bonds in 2024, 2029, 2034, 2039, and 2041. Yields range from 1.45% priced at par in 2011 to 4.05% priced at par in 2019. Bonds maturing in 2034, 2039, and 2041 were not offered during the retail order period.

Bonds from the $22.6 million Series B, which is subject to the AMT, mature from 2010 through 2019, with a term bond in 2031. Yields range from 1.70% priced at par in 2010 to 4.80% priced at par in 2019. All the bonds are callable at par in 2019, and are rated triple-A by both Moody's and Standard & Poor's.

Maria Bonello contributed to this column.

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