Municipal yields fell about three basis points on average yesterday as the market took on new issues at aggressive prices.

The market continued to rally, boosted by last Thursday's weak jobs data and Fed ease. Traders took some profits late in the afternoon, and prices were quoted up 1/8 to as much as 3/8s and 1/4 point on average by session's end.

In the debt futures market, the September municipal futures contract settled down 2/32, to 97.16, while the MOB spread was calculated at negative 164.

New issuance was dominated by competitive deals, which, in some cases, were priced through.,6% for longer bonds. Despite the, high prices, underwriters reported good demand for new bonds as supply remains thin.

"Investors have no other place to turn," a Chicago-based trader said. "We're in a new range now, and we should stay there, unless people try to run it up too quickly. We might have some adjustment then, but we're still likely to trend higher. "

However, several market players noted that the aggressive competitive prices prompted some buyers to wait for higher yielding negotiated deals.

"When buyers see the syndicates laddered up to buy a competitive loan they'll focus their attention elsewhere," acknowledged one trader. "It's no secret there's supply coming. "

"A lot of the buyers that have decent amounts of money are putting it to work," said an underwriter. "But others seemed to sit back saying that the market seems to be running away a bit. "

Leading competitive action, $279 million non-callable Georgia full faith and credit GO bonds were won by Lehman Brothers with a net interest cost of 5.6208%.

The firm reported an unsold balance of $48 million, with deep discounts from 2009 to 2012 sold to permanent investors.

The bonds were reoffered to investors at yields ranging from 2.75% in 1993 to 5.95% in 2012.

The issue is rated Aaa by Moody's Investors Service and Fitch Investors Service and Aa-plus by Standard & Poor's Corp.

First Boston Corp. had the cover bid with an NIC of 5.7004%.

In other action, a syndicate led by Prudential Securities won $242 million of Minnesota full faith and credit GO state refunding bonds with a true interest cost of 5.333%.

Prudential Securities reported all bonds sold by session's end.

The bonds were priced to yield from 2.70% in 1993 to 5.85% in 2007.

The issue is rated Aa by Moody's and double-A-plus by both Standard & Poor's and Fitch.

A Prudential group also won $115 million of Ohio Public Facilities Commission higher education capital facilities revenue bonds with an NIC of 5.558%.

The firm reported good investor demand across the board and an unsold balance of $5.8 million in late afternoon.

The offering included serials priced to yield from 3.90% in 1994 to 5.95% in 2007.

Bonds in 1997 are insured by Financial Security Assurance Inc., while bonds from 1999-2007 are insured by the AMBAC Indemnity Corp. and are triple-a rated by both Moody's and Standard & Poor's. The remaining bonds are rated A by Moody's and A-plus by Standard & Poor's.

Bear, Stearns & Co. had the cover bid with an NIC of 5.5633%.

Negotiated pricings were scarce, as some underwriters opted to hold some deals until later in the week.

Leading the way, Goldman, Sachs & Co. priced and repriced $174 million of Sacramento Municipal Utility District electric revenue refunding bonds.

Some serial bond yields were lowered four to five basis points.

The final offering included serial bonds only, priced to yield from 4.75% in 1997 to 6. 1 0% in 2009.

Bonds from 1997 to 2007, and 2009, are insured by Municipal Bond Investors Assurance Corp.: the 2008 maturity is insured by Financial Guaranty Insurance Co. The deal is rated triple-a by Moody's and Standard & Poor's; the FGIC-insured bonds are also rated triple-a by Fitch Investors Service.

Goldman Sachs and Lehman Brothers as co-managers priced $125 million of Oregon Tri-county Metropolitan Transportation district GO bonds.

Serial bonds were priced to yield from 2.70% in 1993 to 5.95% in 2007. A 2012 term was priced as 6s to yield 6.10%.

The bonds are rated Aa by Moody's and Aa-plus by Standard & Poor's.

Secondary Market

Secondary supply is light, and market players were scrambling for any available bonds. For example, The Blue List, an approximate measure of dealer inventory, fell $112 million yesterday, to $800 million.

Despite the shortage of supply, market players reported active trading throughout the session with some large blocks of bonds hitting the Street in the form of customer bid-wanted lists.

Blocks of California bonds were trading right around levels quoted prior to Moody's downgrade Monday. For example, a $5 million block of 63/4s of 2006 were offered at 6%, less 1/8, while a block of 7s of 2009 were sold right around 6.20%, according to market sources.

In other secondary dollar bond trading, Florida Turnpike Authority FGIC 6.30s of 2012 were quoted at 1003/8-3/4 to yield 6.26%, New York City Water Authority AMBAC 6.208 of 2021 were quoted at 995/8-7/8 to yield 6.22%, and New Jersey Highway Authority 6\1/4s of 2014 were quoted at 100 1/4-1/2 to yield 6.22%. Texas Municipal Power Agency MBIA 53/4s of 2012 were quoted at 947/8-95 to yield 6.20% and Metropolitan Transportation Authority MBIA 61/4s of 2017 were quoted at 997/8-1001/4 to yield 6.26%.

Short-term market players said that trading was choppy through most of yesterday's session, with prices continuing their rise to the top of the charts. By the end of the session yields were as much as five basis points lower.

One market participant said that a large institutional investor offered a $70 million block of New York City Tans 31/4s, and that the notes were quickly scooped up by retail. "

Late in the session, Los Angeles Trans 3 3/4s were quoted at 2.85% bid, 2.80% offered; New York City Tans 3 1/4s were quoted at 2.73% bid, 2.65% offered; San Bernardino Co., Calif., Trans were quoted at 2.90% bid, 2.95% offered; and New York State Trans 3.65s were quoted at 2.60% bid, 2.55% offered.

Negotiated Pricings

Piper, Jaffray Inc. priced $63 million Thornton, Colo., GO water refunding bonds.

The offering included serial bonds priced to yield 2.75% in 1992 to 6. 10% in 2006. A 2009 term was priced to yield 6.25%, a 2012 term was priced to yield 6.27%, and a 2015 term was priced to yield 6.27%.

The bonds are FGUIC-insured and triple-A rated by Moody's. Standard & Poor's, and Fitch.

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