The municipal market was slightly firmer yesterday as most economic data came in weaker than expected.

“We’re firmer by about three basis points,” a trader in Los Angeles said. “There was a decent amount of trading activity, and there was certainly some firmness.”

The Treasury market showed some gains yesterday. The yield on the benchmark 10-year Treasury note, which opened at 3.77%, finished at 3.70%. The yield on the two-year note was quoted near the end of the session at 2.53% after opening at 2.56%.

In economic data released yesterday, retail sales dropped 0.4% in December after a revised 1.0% increase in November. Additionally, retail sales excluding autos dipped 0.4% in December after a revised 1.7% uptick the month before. Economists polled by IFR Markets had predicted no change in retail sales, and a 0.1% decline in retail sales excluding autos.

The producer price index dropped 0.1% in December after a 3.2% rise the previous month. Additionally, the core PPI rose 0.2% in December, after a 0.4% uptick the prior month. Economists polled by IFR Markets had predicted a 0.2% gain in PPI, and a 0.2% rise in core PPI.

Business inventories rose 0.4% in November after a 0.1% rise in October. Additionally, business sales increased 1.6% in November after a revised 0.9% uptick the prior month. Economists polled by IFR Markets had predicted a 0.5% rise in business inventories and a 1.7% jump in business sales.

In the new-issue market yesterday, Lehman Brothers tentatively priced about $887 million of bonds for Chicago to benefit O’Hare International Airport, in two pieces.

Lehman priced $775 million of third-lien general airport revenue bonds for Chicago. Bonds from the largest series — worth $525.2 million — mature from 2019 through 2028, with term bonds in 2033, 2034, and 2038. Yields range from 3.77% with a 5% coupon in 2019 to 4.64% with a 4.5% coupon in 2038. The bonds are callable at par in 2018. Bonds from the second largest series — worth $175.3 million — mature from 2018 through 2020, yielding 3.67%, 3.77%, and 3.84%, respectively, all with 5% coupons. The bonds are callable at par in 2017.

Bonds from the third largest series — worth $45.1 million — mature from 2010 through 2028, with term bonds in 2033 and 2038. Yields range from 2.77% with a 4% coupon in 2010 to 4.64% with a 4.5% coupon in 2038. These bonds are callable at par in 2018. And bonds from the smallest series — $29.4 million of bonds subject to the alternative minimum tax — mature in 2018, 2023, 2028, and 2038, yielding 4.07% with a 4% coupon, 4.50% with a 4.25% coupon, 4.75% with a 4.5% coupon, and 4.77% with a 4.6% coupon, respectively. The bonds are callable at par in 2018.

Lehman also priced $111.7 million of passenger facility charge revenue refunding bonds for Chicago. The bonds mature from 2012 through 2016, with yields ranging from 2.98% with a 5% coupon in 2012 to 3.43% with a 4% coupon in 2016. The bonds are not callable.

The bonds are insured by Financial Security Assurance Inc. The underlying credit is rated A1 by Moody’s Investors Service, A-minus by Standard & Poor’s, and A by Fitch Ratings.

In other activity, JPMorgan priced $381.2 million of sewerage system fixed rate revenue bonds for Columbus. The bonds mature from 2023 through 2032, with yields ranging from 3.87% with a 5% coupon in 2023 to 4.55% with a 4.5% coupon in 2032. The bonds, which are callable at par in 2017, are rated Aa2 by Moody’s and AA by Standard & Poor’s and Fitch.

Triple-A rated Fairfax County, Va., competitively sold $237.9 million of public improvement bonds to Banc of America Securities LLC with a true interest cost of 3.77%. The bonds mature from 2009 through 2028, with yields ranging from 2.90% with a 4% coupon in 2013 to 4.22% with a 4.125% coupon in 2028. Bonds maturing from 2009 through 2012, and from 2017 through 2025 were not formally re-offered.

Also, New York’s Nassau County competitively sold $125 million of bonds to UBS Securities LLC in two series. The larger series — $105 million of general improvement bonds insured by FSA — matures from 2009 through 2028, and was won with a TIC of 3.94%. Yields range from 2.62% with a 3.5% coupon in 2010 to 4.22% with a 4% coupon in 2028. The smaller series — $20 million of sewer and storm water resources district bonds insured by MBIA Insurance Corp. — matures from 2009 through 2029, with a term bond in 2033, and was won with a TIC of 4.10%. Yields range from 2.58% with a 3.5% coupon in 2009 to 4.22% with a 4.125% coupon in 2033. All bonds are callable at par in 2018. The underlying credit is rated A2 by Moody’s, A by Standard & Poor’s, and A-plus by Fitch.

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