The municipal market was slightly weaker yesterday, following the Treasury market. Traders said tax-exempt yields were higher by about one or two basis points. “It’s feeling a little weaker and there’s not a lot trading, but those that are trading are hitting bids down a quarter point or so,” a trader in Los Angeles said. “It feels like the market wants to back off but everyone has to protect their positions, and isn’t ready to start marking their bonds down.” “We’ve been working through and kind of keeping things close to shore,” a trader in New York added. “We’ve seen some reasonable customer situations, with some buyers and sellers, but it’s not terribly liquid. There has been a sense of order restored over the last few days from that black hole feeling of the last few weeks.” “There’s been reasonable interest in new issues,” the trader continued. “But in the secondary market, a lot of guys are closing their books for the rest of the year. A lot of the big guys are closing out their balance sheets and the activity level is relatively low.” The Treasury market showed losses yesterday. The yield on the benchmark 10-year Treasury note, which opened at 3.95%, finished at 4.04%. The yield on the two-year note was quoted near the end of the session at 3.20% after opening at 2.88%. In economic data released yesterday, durable goods orders dropped 0.4% in October after a revised 1.4% decline in September. Durable goods orders excluding transportation dipped 0.7% after a 1.1% uptick the month before. Economists polled by IFR Markets predicted a 0.3% rise in durable goods orders and a 0.4% gain in durable goods excluding autos. In the new-issue market yesterday, Merrill Lynch & Co. priced $450 million of transit bonds for the Central Puget Sound Regional Transit Authority, Wash. The bonds mature in 2008 through 2013 and 2018, with term bonds in 2032, 2034, and 2036. Yields range from 3.31% with a 5% coupon in 2009 to 4.55% with a 5% coupon in 2036. Bonds maturing in 2008 were priced via sealed bid. Financial Security Assurance Inc. insures all bonds except those maturing in 2008, a portion of those maturing in 2034, and 2036. The bonds are rated Aa3 by Moody’s Investors Service and AAA by Standard & Poor’s. Dallas competitively sold $363.1 million of general obligation refunding and improvement bonds to Merrill at a true interest cost of 4.13%. The bonds mature from 2009 through 2027. Yields range from 3.27% with a 4% coupon in 2009 to 4.56% with a 4.5% coupon in 2026. Bonds maturing in 2011 through 2021 and 2027 were not formally re-offered. MBIA Insurance Corp. insures bonds maturing from 2022 through 2027. The underlying credit is rated Aa1 by Moody’s and AA-plus by Standard & Poor’s. New Jersey competitively sold $200.7 million of general obligation bonds to JPMorgan with a true interest cost of 4.51%. The bonds mature from 2008 through 2027. Yields range from 3.32% with a 4% coupon in 2009 to 4.30% with a 5% coupon in 2025. Bonds maturing in 2008, 2016, 2018, 2019, 2024, 2026, and 2027 were not formally re-offered. The bonds are callable at par in 2017. The bonds are rated Aa3 by Moody’s, AA by Standard & Poor’s, and AA-minus by Fitch Ratings. New Jersey also competitively sold $39.4 million of various-purpose taxable GO bonds to Citi with a true interest cost of 4.65%. The bonds mature in 2008 through 2015. Yields range from 4.60% with a 4.75% coupon in 2013 to 4.78% with a 5% coupon in 2015. Bonds maturing in 2008 through 2012 were not formally re-offered. Campbell County, Ky., Sanitation District No. 1 competitively sold $107 million to JPMorgan at a true interest cost of 4.57%. The bonds mature from 2008 through 2027, with term bonds in 2032 and 2037. Yields range from 3.30% with a 4% coupon in 2009 to 4.36% with a 5% coupon in 2027. Bonds maturing in 2008, 2011 through 2014, 2032, and 2037 were not formally re-offered. The bonds are callable at par in 2017. MBIA insures the bonds and the underlying credit is rated Aa3 by Moody’s and AA-minus by Standard & Poor’s. Merrill Lynch priced $90.8 million of home ownership revenue bonds for the Wisconsin Housing and Economic Development Authority in two series. The larger series — $63 million subject to the alternative minimum tax — mature in 2024, 2029, 2034, and 2038. Yields range from par with a 5.125% coupon in 2024 to 4.15% with a 5.5% coupon in 2038. These bonds are callable at par in 2017. The bonds are rated Aa2 by Moody’s and AA by Standard & Poor’s. The deal also contained a $27.7 million taxable component. Niagara Falls, N.Y., competitively sold $39.4 million of general obligation bonds to Merrill with a net interest cost of 4.52%. The bonds mature in 2008 through 2037. Yields range from 3.15% with a coupon of 4.5% in 2008 to 3.91% with a 4.5% coupon in 2018. Bonds maturing in 2019 through 2037 were not formally re-offered. The bonds are callable at par in 2017. FSA insures the bonds, which are rated BBB-minus by Standard & Poor’s. UBS Securities LLC priced $30 million of residential revenue bonds for the Maryland Department of Housing and Community Development. The bonds, subject to the AMT, mature in 2008 and are priced at par with a 3.37% coupon. Moody’s rates the bonds MIG-1, while Fitch assigns an F-1-plus. Economic data being released later this week will help set the market’s tone. Today, the preliminary gross domestic product for the third quarter will be released, followed by initial jobless claims for the week ended Nov. 24, continuing jobless claims for the week ended Nov. 17, and October new home sales. The October personal income and consumption, the October core personal consumption expenditures deflator, the November Chicago purchasing managers’ index, and October construction spending will be released tomorrow. Economists polled by IFR are predicting a reading of 4.5% for preliminary GDP, 0.8% for the GDP price index, 330,000 initial claims, 2.600 million continuing claims, and 753,000 new home sales. In addition, IFR economists are expecting a 0.4% level for personal income, 0.1% for the PCE, 1.8% for the core PCE deflator, a reading of 49.7 for the Chicago PMI index, and a drop of 0.3% in construction spending.

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