Munis Unchanged With Slightly Weaker Tone

The municipal market was quiet and largely unchanged yesterday, though with a slightly weaker tone, as the New York Transitional Finance Authority priced a $600 million deal and Los Angeles County postponed its $1.1 billion note sale originally slated for this week.Citi priced the $600 million sale of building aid revenue bonds for the New York TFA. The bonds mature from 2011 through 2034, with a term bond in 2034. Pricing information was not available by press time. Citi began offering the bonds to retail investors Monday with a high yield of 5.30% with a 5.25% coupon in 2039. The credit is rated A1 by Moody's Investors Service and AA by Standard & Poor's.

The one-year tax and revenue anticipation note sale from Los Angeles County was postponed and moved to the day-to-day calendar yesterday, reportedly to review budgetary implications. Merrill Lynch & Co. is now expected to price the notes as early as next week, market sources say. The notes are rated MIG-1 by Moody's, SP-1-plus by Standard & Poor's, and F1-plus by Fitch Ratings.

Traders said tax-exempt yields in the secondary market were flat, though with a weaker tone.

"It's fairly quiet," a trader in New York said. "I'm not really seeing much movement in either direction. The Treasury has turned around a bit, so that's kind of easing up the pressure on our market somewhat, but not too much. In any event, I'm not really seeing that same weakness that's been around the past week or two, but I'm certainly not seeing it any better. I'd just call it flat."

"I'd still call the tone weaker, just because I'm not really seeing any improvement out there, but it's still pretty flat," a trader in Los Angeles said. "But yeah, if there's any movement at all today, we're cheapening slightly. But like I said, it's mostly flat, just a bit of a weaker tone."

Elsewhere in the new-issue market, Morgan Stanley priced $286.5 million of refunding bonds for the New York Local Government Assistance Corp. in two series. Bonds from the $105.4 million series mature from 2015 through 2021, with yields ranging from 2.66% with a 3% coupon in 2015 to 3.82% with a 5% coupon in 2021. Bonds from the $181.1 million series mature from 2017 through 2020, with yields ranging from 3.17% with a 5% coupon in 2017 to 3.69% with a 5% coupon in 2020. The bonds, which are callable at par in 2019, are rated Aa3 by Moody's, AAA by Standard & Poor's, and AA-minus by Fitch.

The Treasury market showed some gains yesterday. The yield on the benchmark 10-year note, which opened at 3.62%, finished at 3.55%. The yield on the two-year note finished at 0.92% after opening at 0.94%. The yield on the 30-year bond, which opened at 4.49%, finished at 4.44%.

As of Tuesday's close, the triple-A muni scale in 10 years was at 82.7% of comparable Treasuries, according to Municipal Market Data. Additionally, 30-year munis were 103.3% of comparable Treasuries. Also, as of the close Tuesday, 30-year tax-exempt triple-A rated general obligation bonds were at 107.9% of the comparable London Interbank Offered Rate.

In economic data released yesterday, the Institute for Supply Management's non-manufacturing business activity composite index was 44.0 in May, up from 43.7 in April. Economists polled by Thomson Reuters had expected a 45.0 level.

New factory orders for manufactured goods climbed 0.7% in April, smaller than the 0.9% increase projected by Thomson Reuters and after a revised 1.9% decrease in March.

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