Munis Unchanged as Holiday Approaches

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The municipal market was unchanged to slightly weaker yesterday.

"It's quiet. Getting close to the holiday weekend," a trader in New York said. "We might be off a little bit, just following Treasuries, but there's really nothing going on."

"It's pretty thin, there have been no real dramatic changes," a trader in Chicago added. "It's probably sympathetically weaker as people try to unload some stuff before the long weekend, but it's pretty thin."

Trades reported by the Municipal Securities Rulemaking Board yesterday showed some gains. A dealer sold to a customer California 5s of 2037 at 5.14%, up one basis point from where they were sold Wednesday. Bonds from an interdealer trade of Jackson, Tenn., 5.625s of 2039 yielded 5.76%, one basis point higher than where they traded Wednesday. A dealer sold to a customer Assured Guaranty Corp.-backed Kentucky Economic Development Finance Authority 6s of 2038 at 6.15%, up three basis points from where they were sold Wednesday.

Bonds from an interdealer trade of California's Bay Area Toll Authority 5s of 2039 yielded 4.87%, one basis point higher than where they traded Wednesday. Bonds from an interdealer trade of MBIA Insurance Corp.-backed Odessa, Texas 5s of 2025 yielded 4.69%, up one basis point from where they were sold Wednesday. A dealer sold to a customer Pennsylvania's Delaware Valley Regional Financial Authority 6s of 2038 at 5.35%, even with where they were traded Wednesday.

"We're seeing some weakness out there, mostly out on the long end, but it's not more than a basis point or so," a trader in Los Angeles said. "And it's very quiet. There's not much happening ahead of the long weekend."

The Treasury market showed some losses yesterday. The yield on the benchmark 10-year Treasury note, which opened at 3.77%, finished at 3.79%. The yield on the two-year note was quoted near the end of the session at 2.37% after opening at 2.33%. The yield on the 30-year Treasury finished at 4.39% after opening at 4.38%.

In economic data released yesterday, preliminary second-quarter gross domestic product rose 3.3% after a 1.9% increase the previous reading. Economists polled by IFR Markets had predicted a 2.7% climb.

Initial jobless claims for the week ended Aug. 23 came in at 425,000 after a revised 435,000 the previous week. Economists polled by IFR had predicted 427,000 initial jobless claims.

Continuing jobless claims for the week ended Aug. 16 came in at 3.423 million after a revised 3.359 million. Economists polled by IFR had predicted 3.400 million continuing jobless claims.

Personal income and consumption for July will be released today, along with the core personal consumption expenditures deflator, the August Chicago purchasing managers index, and the final August University of Michigan consumer sentiment index.

Economists polled by IFR Markets are predicting a 0.1% decline in personal income, a 0.2% increase in personal consumption, a 0.3% rise to the core PCE deflator, a 49.8 Chicago PMI reading, and a 62.0 reading for the Michigan sentiment index.

In the new-issue market yesterday, Austin competitively sold $76 million of public improvement bonds to Banc of America Securities LLC with a true interest cost of 4.57%. The bonds mature from 2009 through 2028, with yields ranging from 2.55% with a 3.5% coupon in 2011 to 4.78% with a 4.75% coupon in 2027. Bonds maturing in 2009 and 2028 were not formally re-offered. The bonds, which are callable at par in 2018, are rated Aa1 by Moody's Investors Service, AAA by Standard & Poor's, and AA-plus by Fitch Ratings.

Austin also competitively sold $26.7 million of public property finance contractual obligation bonds to Robert W. Baird & Co. with a TIC of 3.02%. The bonds mature from 2009 through 2015, with yields ranging from 1.75% with a 4% coupon in 2009 to 3.26% with a 3.5% coupon in 2015. The bonds are not callable.

Finally, South Carolina's York County School District No. 1 competitively sold $50 million of general obligation bond anticipation notes to Wachovia Bank, NA, with a net interest cost of 1.70%. The Bans mature in September 2009, yielding 1.67% with a 3% coupon. The credit is rated MIG-1 by Moody's and SP-1-plus by Standard & Poor's.

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