More than $1 billion of taxable and tax-exempt debt from the Dormitory Authority of the State of New York led the way in the primary Tuesday, as the municipal market withstood an influx of several billion dollars in new issuance with yields backing up just two basis points overall.

“There’s definitely some weakness out there, but given the supply that’s hitting, it’s not down as much as I had thought we might have,” a trader in New York said.

“There’s just an onslaught of supply coming this week, and today obviously hasn’t been an exception. I don’t really know that yields can hold at these levels the entire week without selling off in a more pronounced way, but for now, I think we’re just one or two basis points cheaper today.”

Leading the new-issue market Tuesday, M.R. Beal & Co. priced $1.21 billion of taxable and tax-exempt debt for DASNY, including $596.9 million of taxable Build America Bonds.

The BABs mature from 2021 through 2024, with term bonds in 2033 and 2040, and were priced to yield between 155 and 190 basis points over the comparable Treasury yields.

Yield and coupon information on the BABs, which are subject to a make-whole call at Treasuries plus 25 basis points, was not available by press time.

The $555.9 million tax-exempt series matures from 2011 through 2030, with term bonds in 2035 and 2040. Yields range from 0.68% with a 2% coupon in 2012 to 4.07% with a 5% coupon in 2040.

Bonds maturing in 2011 were not formally re-offered. The bonds are callable at par in 2020.

An additional $54.4 million tax-exempt series matures from 2011 through 2028, with term bonds in 2030 and 2035.

Yields range from 0.40% with a 2% coupon in 2011 to 4.02% with a 5% coupon in 2035. The bonds are callable at par in 2020.

The credit is rated AAA by Standard & Poor’s and AA by Fitch Ratings.

Morgan Stanley priced $520 million of taxable debt for Connecticut in two series, including $294.4 million of taxable BABs.

The BABs mature in 2030, yielding 5.02% with a 5.09% coupon, or 3.26% after the 35% federal subsidy. The bonds were priced to yield 128 basis points over the 30-year Treasury yield, and contain a make-whole call at Treasuries plus 20 basis points.

Debt from a $203.4 million series of taxable qualified school construction bonds matures in 2029, yielding 5.24% with a 5.295% coupon.

The bonds were priced to yield 150 basis points over the 30-year Treasury yield, and contain a make-whole call at Treasuries plus 20 basis points.

The deal also contains a $22.2 million series of taxable recovery zone economic development bonds, which mature in 2030, yielding 5.24% with a 5.305% coupon.

The bonds were priced to yield 150 basis points over the 30-year Treasury yield, and contain a make-whole call at Treasuries plus 25 basis points.

The credit is rated Aa2 by Moody’s Investors Service and AA by Standard & Poor’s and Fitch.

Amid the supply rush, however, some issuers were pulling parts of their scheduled deals off the table due to market conditions.

Both Georgia and Pennsylvania postponed tax-exempt refunding components of deals slated to hit the market Tuesday due to the weakening market.

Georgia had planned to sell up to $321 million of refunding bonds, while Pennsylvania had a $386.5 million refunding scheduled.

For Pennsylvania, the refunding was to accompany its $1 billion sale of tax anticipation notes, which were sold to JPMorgan with an effective rate of 0.32%.

The debt is rated SP-1-plus by Standard & Poor’s and F1-plus by Fitch.

Despite the postponement of its refunding, Georgia competitively sold $318.5 million of debt to Citi with a true interest cost of 3.66%. No further information on the sale was available at press time.

The credit is rated triple-A by all three major ratings agencies.

The Municipal Market Data triple-A scale yielded 2.49% in 10 years Tuesday, up one basis point from Monday’s 2.48%, while the 20-year scale edged up two basis point to 3.36%, up from Monday’s 3.34%. The scale for 30-year debt yielded 3.74%, one basis point higher than Monday’s 3.73%.

“The story was the primary market today, just like it’s going to be all week,” a trader in Los Angeles said Tuesday. “We’re probably two, maybe three basis points weaker, with all eyes focused on the new issues. There wasn’t a whole lot of action in the secondary, and I anticipate that will continue to be the case as the week progresses.”

Tuesday’s triple-A muni scale in 10 years was at 100.8% of comparable Treasuries and 30-year munis were at 100.3%, according to MMD, while 30-year tax-exempt triple-A general obligation bonds were at 110.7% of the comparable London Interbank Offered Rate.

The Treasury market was weaker Tuesday. The benchmark 10-year note finished at 2.49% after opening at 2.47%.

The 30-year bond was quoted near the end of the session at 3.75% after opening at 3.70%. The two-year note was finished at 0.42% after opening at 0.41%.

In economic data released Tuesday, the Institute for Supply Management’s non-manufacturing business activity composite index climbed to a seasonally adjusted 53.2 in September from 51.5 in August, the group said Tuesday.

Economists expected a 51.5 level. Readings below 50 signal economic contraction. Levels above 50 signal growth.

Meanwhile, Federal Reserve chairman Ben Bernanke displayed growing alarm about record federal budget deficits Monday and called for action. He said there is “little scope” for reducing the $1.4 trillion budget deficit the next year or two.

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