Munis Weaker in 'Extremely Choppy' Market

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The municipal market was mostly weaker yesterday, while most of the week's largest deals were priced in the primary market.

Traders said tax-exempt yields were higher by three to five basis points on the short end, were unchanged in the intermediate maturities, and were weaker by two or three basis points on the long end.

"The market was extremely choppy and lacked some liquidity," a trader in Chicago said. "There were a couple of trades that exaggerated the price movement. Overall, the market lacked order."

"But there's still business to be done up and down the curve," the trader continued. "There's still June and July money out there, it's just being spent selectively."

The Treasury market showed gains yesterday. The yield on the benchmark 10-year Treasury note, which opened at 4.11%, finished at 4.08%. The yield on the two-year note was quoted near the end of the session at 2.80%, after opening at 2.92%.

"There's been some selling pressure from institutions, with large liquidation lists at the front of the curve," a trader from Los Angeles said. "People are just looking to see where they can raise cash."

In the new-issue market yesterday, Lehman Brothers priced $854 million of tax and revenue anticipation notes for various California communities in multiple series. Notes from the $269 million Series A-1, for local agencies, mature in June 2009, with a yield of 1.8% on a 3% coupon. Notes from the $55.2 million Series A-2, for Fresno, mature in June 2009, with a yield of 1.64% on a 3% coupon. Notes from the $315 million Series A-3, for Riverside County, mature in June 2009, with a yield of 1.64% on a 3% coupon. Notes from the $160 million Series A-4, for San Bernardino County, mature in June 2009, with a yield of 1.64% on a 3% coupon. Notes from the $55 million Series B, for Tulare County, mature in June 2009, with a yield of 2% on a coupon of 3%.

The notes are rated MIG-1 by Moody's Investors Service and SP-1-plus by Standard & Poor's.

Goldman, Sachs & Co. priced $700 million in building aid revenue bonds for the New York City Transitional Finance Authority. Bonds mature from 2010 through 2029 with a term bond in 2034 and two term bonds in 2038. Yields range from 2.28% on a 3% coupon in 2010 to 4.88% on a 4.5% coupon in 2038. The bonds, which are callable at par in 2018, have underlying credit ratings of A1 from Moody's, AA-minus from Standard & Poor's, and A-plus from Fitch Ratings.

Merrill Lynch & Co. priced $648.3 million in natural gas purchase revenue bonds for the Public Authority for Colorado Energy. Bonds mature in 2018, 2023, 2028 and 2038, with yields ranging from 6.15% with a 5.75% coupon in 2018 to 6.81% with a 6.5% coupon in 2038. The bonds have an underlying credit rating of A1 from Moody's, A from Standard & Poor's and A-plus for Fitch.

Morgan Stanley priced $244 million in revenue bonds for the Massachusetts Health and Educational Facilities Authority to benefit the Boston Medical Center. Bonds from series B mature from 2012 through 2018, with term bonds in 2023, 2028, 2031 and 2038. Yields range from 3.82% on a 4% coupon in 2012 to 5.48% on a 5.25% coupon in 2038. The bonds, which are callable in 2018, have credit ratings of A3 from Moody's and A-minus from Standard & Poor's.

Citi priced $221.7 million of Emory University revenue bonds for Georgia's Private Colleges and Universities Authority in multiple series. Bonds from the $99.9 million Series B mature in 2011, with a yield of 2.89% and coupons of 3.5%, 4% and 5%. Bonds from the $121.8 million Series C mature 2038, with a yield of 4.73% and coupons of 4.5% and 5%. Bonds from Series C are callable at par in 2018, while Series B bonds are not callable. Bonds from both series are rated Aa2 by Moody's and AA by Standard & Poor's.

Banc of America Securities LLC priced $164 million of sales tax revenue refunding bonds for Los Angeles County Metropolitan Transportation Authority. Bonds mature from 2011 through 2023, with yields ranging from 2.89% with a 4% coupon to 4.31% with a 4.2% coupon. Bonds maturing from 2012 to 2020 and an $8.07 million bond in 2021 are insured by Assured Guaranty Corp. The bonds, which are callable at par in 2018, have expected underlying credit ratings of A1 from Moody's and AA from Standard & Poor's.

Romeoville, Ill., competitively sold $108.5 million of general obligation capital appreciation bonds to Harris NA with a true interest cost of 5.62%. The bonds mature 2021 through 2037, with yields ranging from 5.12% in 2021 to 5.36% in 2024. Bonds maturing 2025 through 2037 were not re-offered. The bonds, which are callable at par in 2018, are insured by Assured Guaranty, and have underlying ratings of A2 from Moody's and A-plus from Fitch.

Banc of America also priced $65 million of home ownership revenue bonds for the North Carolina Housing Finance Agency, subject to the alternative minimum tax. Bonds mature 2009 through 2017, with term bonds in 2022, 2028, and 2032, and two term bonds in 2038. All bonds sold at par on coupons from 3.25% in 2009 to 5.55% in 2038, except for a $19.5 million term bond in 2038, which yielded 5.56% on a 6% coupon. The bonds, which are callable in 2018 at par, are rated Aa2 from Moody's and AA from Standard & Poor's.

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