The municipal market was unchanged with a firmer tone yesterday after the Senate Wednesday night approved its version of the much-discussed $700 billion Wall Street bailout plan by the federal government.

The Senate approved the modified $700 billion bailout package, which will now be brought before the House today. However, even if the plan is passed, some market participants do not think it will be a quick fix.

"It's too late, and it's a temporary infusion, so while it will help us, and it might give us some piece of mind for a couple of weeks, maybe a month, it's not really going to hold fit," a trader in New York said. "Somebody made a good comment the other day, that this was going to keep us out of a depression, not a recession. I agree with that.

"It's kind of like the tax infusion we got earlier this year from President Bush. That little cash infusion helped for two or three months, and then all of a sudden, the money was gone," the trader said. "I think it'll be like that. It'll steady banks out a little bit for a little while, but at the end of the day, they still have a lot of garbage in their trunk. I have a bleak outlook, unfortunately."

Fred Yosca, managing director and head of trading at BNY Capital Markets, said that though he's not sure the bailout will be "sufficient" in jump-starting the market, it is "a necessary condition" that has "got to happen."

"If it's not going to help, then we're really screwed," he said. "The market has to rally and yields have to drop to lower borrowing costs, and then you'll see the deluge of new issues come, so you need the bailout plan to go through for all that to happen."

Likewise, the Treasury market showed gains yesterday. The yield on the benchmark 10-year Treasury note, which opened at 3.74%, finished at 3.65%. The yield on the two-year note opened at 1.82%, and was quoted near the end of the session at 1.62%. The 30-year Treasury bond, which opened at 4.21%, was quoted near the end of the session at 4.17%.

However, in municipals, yields were largely flat, though traders said the market was carrying a firmer tone.

"The Treasury is a bit firmer because there's a little trepidation out there that the bailout plan isn't going to solve everything. And I think that's the case in munis too," a trader in Los Angeles said. "But we're not seeing any real movement [yesterday] to that effect. Or to any effect, for that matter."

Trades reported by the Municipal Securities Rulemaking Board yesterday showed little movement. A dealer sold to a customer California 5.25s of 2025 at 5.42%, even with where they were sold Wednesday. Bonds from an interdealer trade of New York City Transitional Finance Authority 5.5s of 2031 yielded 5.71%, even with where they traded Wednesday. A dealer sold to a customer New York 5.25s of 2026 at 5.47%, even with where they traded Wednesday.

"It's somewhat quiet," a second New York trader said. "The long end seems to be attractive, but nobody wants to hold it, because it seems to get lower and lower in value every morning."

"There's not a ton of trading," a trader in New Jersey added. "There's still not a ton of bonds trading, and it's mostly retail and in smaller blocks. But we're feeling firmer."

Activity in the new-issue market, which has seen numerous postponements and cancellations since the tremendous volatility in the market began more than two weeks ago, was again light yesterday. However, in the largest completed deal of the session, Kansas' Unified Government of Wyandotte County competitively sold $45 million of municipal temporary notes to Citi with a true interest cost of 5.07%. The notes mature in March 2010, yielding 5.00%, priced at par. The credit is rated SP-1-plus by Standard & Poor's.

Over the past few sessions, however, more larger deals have been reaching completion. Wednesday, when New York's Metropolitan Transportation Authority successfully issued $230 million of its commercial paper, with maturities ranging from one week to 30 days, at a maximum rate of 5.25%. And Tuesday, the New York City TFA came to market with a $300 million sale of building aid revenue bonds.

Several more deals were postponed earlier this week, the largest of which was a $375 million competitive note sale for Massachusetts. The notes, which were scheduled to be priced yesterday, were postponed Wednesday and are now scheduled to come to market Oct. 7.

In economic data released yesterday, initial jobless claims for the week ended Sept. 27 came in at 497,000, after a revised 496,000 the previous week. Economists polled by Thomson Reuters had predicted 475,000 initial jobless claims.

Continuing jobless claims for the week ended Sept. 20 came in at 3.591 million, after a revised 3.543 million the prior week. Economists polled by Thomson had predicted 3.550 million continuing claims.

New factory orders for manufactured goods slumped 4.0% in August. The factory order decrease, to $444.4 billion, was larger than the 2.5% decrease projected by Thomson and came after a revised 0.7% increase to $463.0 billion in July.

Excluding transportation, the level of all new manufacturing orders fell 3.3% to about $392.3 billion in August, following a 0.5% rise in July to $405.7 billion. The increase compared to a 2.4% decrease projected by Thomson.

On tap for today is the September non-farm payrolls report. Economists polled by Thomson Reuters are predicting a loss of 100,000 jobs.

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