Munis Stand Pat, Ending Run of Weakness

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Municipals yesterday ended an 11-session string of weakness that began last month, while new issues led with a $457.9 million revenue bond sale by the California State University Trustees.

Munis ended unchanged while traders said the tone of the market was weaker for much of the session, and some non-high-grade municipals still showed mild losses.

"It's spotty. I think the deals that came attracted real good interest," a trader in New York said. "If you have a high grade, you're flat to maybe even one basis point better. If you have anything but, your bid may be down some to no bid."

In the primary market, Barclays Capital priced the Cal State deal. The bonds mature from 2010 through 2029, with term bonds in 2034, 2038, 2039, and 2040. Yields range from 1.32% with a 2.5% coupon in 2010 to 5.50% with a 6% coupon in 2040. Bonds maturing in 2038 are insured by Assured Guaranty Corp. All remaining bonds are uninsured. The underlying credit is rated Aa3 by Moody's Investors Service and A-plus by Standard & Poor's. The bonds are callable at par in 2019.

Trades in the secondary market reported by the Municipal Securities Rulemaking Board showed little movement. A dealer sold to a customer California 5s of 2024 at 5.14%, even with where they traded Wednesday. A dealer sold to a customer California Department of Water Resources 5.375s of 2022 at 1.42%, down one basis point from where they were sold Wednesday. A dealer sold to a customer insured Clarkstown, N.Y., 3.625s of 2012 at 1.61%, up one basis point from where they traded Wednesday. Bonds from an interdealer trade of New York City Municipal Water Finance Authority 4.75s of 2031 yielded 5.18%, even with where they were sold Wednesday.

"I think we're just totally flat at this point," a trader in Los Angeles said. "Maybe there's still a bit of a weaker tone out there, but I think we're pretty much just unchanged up and down the curve here."

Meanwhile, the Treasury market showed gains yesterday. The yield on the benchmark 10-year note, which opened at 2.97%, finished at 2.81%. The yield on the two-year note was quoted near the end of the session at 0.89% after opening at 0.93%. The yield on the 30-year bond, which opened at 3.66%, was quoted near the end of the session at 3.50%.

As of Wednesday's close, 10-year tax-exempt bonds were trading at 109.3% of comparable Treasuries, according to Municipal Market Data. Additionally, 30-year munis were trading at 131.4% of comparable Treasuries. Also, as of the close Wednesday, 30-year tax-exempt triple-A rated general obligation bonds were trading at 142.1% of the comparable London Interbank Offered Rate.

Elsewhere in the new-issue market yesterday, Merrill Lynch & Co. priced $136.3 million of GOs for the Oregon University System. Bonds from the $85.9 million Series A mature from 2009 through 2029, with term bonds in 2034 and 2038. Yields ranging 0.72% with a 2% coupon in 2009 to 5.08% with a 5% coupon in 2038. Bonds from the $50.5 million Series B mature from 2009 through 2028, with term bonds in 2033 and 2038. Yields range from 0.72% with a 3% coupon to 5.08% with 5% coupon. The bonds, which are callable at par in 2018, are rated Aa2 by Moody's and AA by Standard & Poor's and Fitch Ratings.

Boston competitively sold $100 million of GOs to Barclays Capital with a true interest cost of 3.87%. The bonds mature from 2010 through 2029, with yields ranging from 2.40% with a 5% coupon in 2014 to 4.75% priced at par in 2029. Bonds maturing in 2010 will be decided via sealed bid. Bonds maturing from 2011 through 2013 and in 2018 and 2019 were not formally re-offered. The bonds, which are callable at par in 2019, are rated Aa1 by Moody's and AA-plus by Standard & Poor's.

Naperville, Ill., competitively sold $47.4 million of GOs to Robert W. Baird & Co. with a TIC of 3.97%. The bonds mature from 2009 through 2028, with coupons ranging from 2% in 2009 to 4.75% in 2028. None of the bonds were formally re-offered. The bonds, which are callable at par in 2018, are rated triple-A by Moody's and Standard & Poor's.

On the economic front, the market awaits the February non-farm payrolls report today. Economists polled by Thomson Reuters are predicting that 648,000 jobs were lost in February, along with a February unemployment rate of 7.9%.

In data released yesterday, initial jobless claims for the week ended Feb. 28 came in at 639,000, after a revised 670,000 the previous week. Economists polled by Thomson Reuters had predicted 650,000 initial jobless claims.

Continuing jobless claims for the week ended Feb. 21 came in at 5.106 million, after a revised 5.120 million the previous week. Economists polled by Thomson had predicted 5.150 million continuing jobless claims.

Non-farm productivity fell 0.4% in the fourth quarter, after an estimated 3.2% rise the previous reading for the quarter. Economists polled by Thomson had predicted a 1.5% uptick.

Final fourth-quarter unit labor costs climbed 5.7%, after an estimated 1.8% rise the previous reading for the quarter. Economists polled by Thomson Reuters had predicted a 3.4% increase.

New factory orders for manufactured goods slumped 1.9% in January. The decrease was smaller than the 3.5% drop projected by Thomson and came after a revised 4.9% decrease in December.

Excluding transportation, the level of all new manufacturing orders fell 0.9% in January, following a 5.4% drop in December. Thomson had predicted a 1.0% decline. BB

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