The municipal market was weaker yesterday, following Treasuries, which saw yields rise after the January consumer price index and core CPI data came in higher than expected.

Traders said tax-exempt yields were higher by three to five basis points.

"The CPI number knocked the Treasury market back a bit, which in turn pushed munis down," a trader in Los Angeles said. "We were only down a basis point or two earlier in the day, but at the end of the session, I'd say we're comfortably down three to five."

Trades reported by the Municipal Securities Rulemaking Board yesterday showed some losses. A dealer sold to a customer insured Golden State Tobacco Securitization Corp. 5s of 2038 at 5.15%, up two basis points from where they were sold Tuesday. A dealer bought from a customer insured New Jersey Transportation Trust Fund Authority 4.75s of 2037 at 4.89%, three basis points higher than where they traded Tuesday. Bonds from an interdealer trade of insured Northern Illinois Municipal Power Agency 5s of 2042 yielded 5.11%, up one basis point from where they traded Tuesday. A dealer sold to a customer California 5s of 2037 at 5.09%, one basis point higher than where they were sold Tuesday.

The Treasury market showed some losses yesterday. The yield on the benchmark 10-year Treasury note, which opened at 3.89%, finished at 3.90%. The yield on the two-year note was quoted near the end of the session at 2.14%, after opening at 2.07%.

In economic data released yesterday, the consumer price index rose 0.4% in January, after a revised 0.4% gain the previous month. Additionally, the core CPI climbed 0.3% in January, after 0.2% growth the prior month. Economists polled by IFR Markets had predicted a 0.3% uptick in CPI, and a 0.2% increase in core CPI.

Housing starts came in at 1.012 million in January, after a revised 1.004 million the previous month. Also, building permits came in at 1.048 million in January, after a revised 1.080 million the prior month. Economists polled by IFR Markets had predicted 1.010 million housing starts and 1.040 million building permits.

More economic data is on tap for today. Initial jobless claims for the week ended Feb. 16 will be released, alongside continuing jobless claims for the week ended Feb. 9, and the January composite index of leading economic indicators. Economists polled by IFR Markets are predicting 348,000 initial claims, 2.775 million continuing claims, and a 0.1% dip in LEI.

In the new-issue market yesterday, the New York Local Government Assistance Corp. competitively sold $391.3 million of refunding bonds toMerrill Lynch & Co., with a true interest cost of 3.91%. The bonds mature from 2009 through 2021, with yields ranging from 2.00% with a 5% coupon in 2009 to 4.06% with a 5% coupon in 2020. Bonds maturing in 2021 were not formally re-offered. The bonds, which are callable at par in 2018, are rated Aa3 by Moody's Investors Service, AAA by Standard & Poor's, and AA-minus by Fitch Ratings.

Union County, N.J., competitively sold $105 million of bonds to Banc of America Securities LLC in two series. Banc of America won the larger series, worth $89.3 million of general improvement bonds, with a net interest cost of 4.28%. The bonds mature from 2009 through 2028, with yields ranging from 2.15% with a 3.25% coupon in 2010 to 4.21% with a 4.5% coupon in 2021. Bonds maturing in 2009, 2013, 2014, and 2022 through 2028 were not formally re-offered. Bonds from the smaller series, worth $15.7 million, were also won by Banc of America, with a NIC of 4.28%. Those bonds mature from 2009 through 2022, with yields ranging from 2.15% with a 3.25% coupon in 2010 to 4.21% with a 4.5% coupon in 2021. Bonds maturing in 2009, 2013, 2014, and 2022 were not formally re-offered. All bonds are callable at par in 2018. The credit is rated Aa1 by Moody's, AA-plus by Standard & Poor's, and AAA by Fitch.

Bear, Stearns & Co. priced $90 million of project revenue bonds for the Massachusetts State College Building Authority. The bonds mature from 2009 through 2028, with term bonds in 2033 and 2038. Yields range from 2.35% with a 3% coupon in 2009 to 4.85% with a 5% coupon in 2038. The bonds are callable at par in 2018. Bonds maturing in 2009 and 2010 are uninsured. The remaining bonds are insured by Assured Guaranty Corp. The underlying credit is rated A1 by Moody's and A-plus by Standard & Poor's.

Rochester, N.Y., competitively sold $87.1 million of GO anticipation notes to Roosevelt & Cross, with a NIC of 1.86%. The notes mature in Feb. 2009, yielding 2.50% priced at par. The notes are rated MIG-1 by Moody's and SP-1-plus by Standard & Poor's.

Banc of America priced for retail investors $84.2 million of limited ad valorem tax bonds for Sarasota County, Fla. The bonds mature from 2008 through 2029, with yields ranging from 2.47% with a 3.25% coupon in 2010 to 5.00% with a 4.875% coupon in 2029. Bonds maturing in 2008, 2009, and from 2020 through 2028 were not offered during the retail order period. The bonds, which are callable at par in 2018, are rated Aa3 by Moody's and A-plus by Standard & Poor's.

Also, the one-year note index rose 107 basis points this week, to 2.09% from 1.02% last week. That is the largest one-week swing in the index since it began in July 1989. The previous record increase was 57 basis points on Jan. 16, 1991, and the previous record decline was 90 basis points on Jan. 10, 2001.

Subscribe Now

Independent and authoritative analysis and perspective for the bond buying industry.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.