Weakness persisted in the municipal market yesterday, as tax-exempt yields pushed higher by as much as five basis points, and issuers in Texas and Colorado came to market with Build America Bonds.“We had a good run, prior to this week, of firmness in the market for a couple weeks, but it has definitely turned around over the past week or so,” a trader in New York said. “We’re seeing a good amount of cheapness in the market, and that’s continuing today.”

“We’ve been weaker all day, but I think the losses really kind of expanded as the day progressed on,” a trader in Los Angeles said. “I’d probably call it down three or four basis points, but it’s maybe even down five or so on the long end.”

In the new-issue market yesterday, Merrill Lynch & Co. priced $219.4 million of tax-exempt and taxable bonds, a portion of which are BABs, for Texas’ Metropolitan Transit Authority in three series. Bonds from the $82.6 million taxable Series C consisting of sales and use tax BABs mature in 2038, yielding 6.98%, or 4.54% including the federal subsidy, with a 6.875% coupon. The BABs were priced 240 basis points over the comparable U.S. Treasury yield.

Bonds from the $94.1 million tax-exempt Series A, of sales and use tax bonds, mature from 2010 through 2029, with yields ranging from 1.00% with a 3% coupon in 2010 to 4.69% with a 5% coupon in 2029. Bonds from the $42.8 million tax-exempt Series B, of sales and use tax contractual obligations, mature from 2010 through 2029, with a term bond in 2033. Yields range from 1.00% with a 3% coupon in 2010 to 5.01% with a 5% coupon in 2033.

All the bonds are callable at par in 2019. The credit is rated Aa3 by Moody’s Investors Service and AA by Standard & Poor’s.

In other BAB activity, Denver competitively sold $44 million of taxable BABs to Wachovia Bank NA, with a true interest cost of 6.03%, or 3.92% after the federal subsidy. The bonds mature from 2017 through 2024, with term bonds in 2029, 2034, and 2039. Yields range from 4.68% with a 4.65% coupon in 2017 to 6.15% priced at par in 2039. The BABs were priced between 100 and 215 basis points over the comparable Treasury yields. The bonds, which are callable at par in 2019, are rated Aa2 by Moody’s, AAA by Standard & Poor’s, and AA by Fitch Ratings.

The Treasury market showed gains yesterday. The yield on the benchmark 10-year Treasury note, which opened at 3.74%, was quoted near the end of the session at 3.65%. The yield on the two-year note was quoted near the end of the session at 0.97%, after opening at 0.98%. The yield on the 30-year bond, which opened at 4.63%, was quoted near the end of the session at 4.52%.

As of Wednesday’s close, the triple-A muni scale in 10 years was at 78.2% of comparable Treasuries, according to Municipal Market Data. Additionally, 30-year munis were 97.6% of comparable Treasuries. Also, as of the close Wednesday, 30-year tax-exempt triple-A rated general obligation bonds were at 102.0% of the comparable London Interbank Offered Rate.

In other new-issue market activity, Morgan Stanley priced $183.5 million of school facilities construction refunding bonds for the New Jersey Economic Development Authority. The bonds mature in 2018, 2020, and from 2024 through 2027, with term bonds in 2039 and 2033. Yields range from 4.00% priced at par in 2018 to 5.25% priced at par in 2033. The bonds, which are callable at par in 2019, are rated A1 by Moody’s, AA-minus by Standard & Poor’s, and A-plus by Fitch.

Merrill Lynch priced $125.6 million of revenue bonds for the Wisconsin Health and Educational Facilities Authority in two series. Bonds from the $90 million Series A mature from 2011 through 2024, with term bonds in 2029 and 2038. Yields range from 2.99% with a 3.5% coupon in 2011 to 5.81% with a 5.5% coupon in 2038. Bonds from the $35.6 million Series B mature from 2009 through 2020, with yields ranging from 2.42% with a 4% coupon in 2009 to 5.10% with a 5% coupon in 2020. All the bonds are callable at par in 2019, and are rated A1 by Moody’s and AA-minus by Fitch.

In economic data released yesterday, initial jobless claims for the week ended May 23 came in at 623,000, after a revised 636,000 the previous week. Economists polled by Thomson Reuters had predicted 620,000 initial jobless claims.

Continuing jobless claims for the week ended May 16 came in at 6.788 million, after a revised 6.678 million the previous week. Economists polled by Thomson had predicted 6.760 million continuing jobless claims.

April durable goods orders rose 1.9% while excluding transportation, orders climbed 0.8%. The March numbers were revised to a 2.1% decline in orders, while excluding transportation, orders were down 2.7% in March. Economists polled by Thomson predicted new orders of durable goods would be flat, and ex-transportation orders would be down 0.4%.

Sales of new single-family homes increased 0.3% to a 352,000 seasonally adjusted annual rate in April. The April figure came after a downwardly revised 351,000 rate in March, a 3.0% decrease. Thomson’s poll of economists had predicted a 360,000 sales level for April.

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