NEW YORK – The tax-exempt market benefited Tuesday from a perfect combination of pent up demand in the muni market, cash waiting on sidelines, a supply and demand imbalance, and fears continuing to come from the Greek and French elections that forced munis firmer.

Traders said demand was very strong in the primary market, pushing the 30-year yield to a record low.

“I’m looking at a lot of new issues and there is still plenty of demand out there,” a Dallas trader said. “If the right bond and the right yield come along, it’s a dog fight. That tells me right there we are in solid shape because people smarter than me are trying to buy the same bonds.”

He added several deals he looked at Tuesday were priced stronger from premarketing levels on Monday, including one deal that saw yields lowered by three basis points.

“The Sentara Health deal showed good demand and that has been strong today,” he said, referring to the $160 million Norfolk City, Va., Sentara Health deal priced by Citi.

More generally speaking, this trader said he is bullish on municipalities. “If I ever have a stronger opinion than most, it’s about credit quality. There are people out there bashing them but if we have municipalities failing, we have more problems than the muni market.”

A portfolio manager in Minnesota agreed that demand was more than strong on Tuesday. “Ridiculous is more like it,” he tweeted. “Cedar and South Dakota were over allocated before I could even get an order in,” referring to the $107.1 million of Cedar Rapids, Iowa, bonds priced in the competitive market and the $123.4 million of South Dakota Conservancy District bonds priced by Wells Fargo Securities.

“It’s been quite the food fight today,” he added. “High quality deals with decent spread are flying off the shelves.”

Activity didn’t seem to slow down all day. “It’s busy this morning,” a New York trader said. “There is a lot of trading.”

Indeed, munis were much stronger Tuesday, according to the Municipal Market Data scale. Yields inside two years were steady while the three-year yield fell one basis point. Yields on the four- to six-year yields dropped two basis points while yields outside seven years plunged four basis points.

On Tuesday, the two-year yield closed flat at 0.31% for the 15th consecutive trading session. The 10-year yield and the 30-year yield each plummeted four basis points to 1.76% and 3.09%.

The 10-year hasn’t hit 1.76% since Feb. 3 when it yielded 1.77%. It remains eight basis points above its record low of 1.68% set Jan. 31. The 30-year beat its previous record low of 3.13% set Monday which beat the prior record of 3.14% last hit on Feb. 2 and originally set Jan. 31.

Treasuries were stronger Tuesday afternoon. The benchmark 10-year yield and the 30-year yield each fell three basis points to 1.85% and 3.04%. The two-year yield fell one basis point to 0.26%.

In the primary market, Citi priced $160 million of Norfolk City, Va., Economic Development Authority revenue and refunding bonds, rated Aa2 by Moody’s Investors Service and AA by Standard & Poor’s. Pricing information was not available by press time.

Wells Fargo priced $123.4 million South Dakota Conservancy District state revolving fund program taxable and tax-exempt revenue bonds, rated triple-A.

Yields on the $69.9 million taxable bonds ranged from 0.508% price at par in 2014 to 3.183% priced at par in 2026. The bonds yielded 25 to 135 basis points above comparable Treasuries. Credits maturing in 2012 and 2013 were not formally reoffered.

Yields on the $53.5 million of tax-exempt bonds ranged from 0.37% with a 4% coupon in 2014 to 2.88% with a 5% coupon in 2032. Credits maturing in 2012 and 2013 were not formally reoffered. The bonds are callable at par in 2022.

The Minnesota portfolio manager said Cedar had some small balances left on bonds with 2% and 3% coupons, but 4% and above coupons were eaten up by institutional investors in presale.

In the competitive market, JPMorgan won the bid for $419.3 million of Massachusetts Commonwealth Transportation Fund revenue bonds for the Accelerated Bridge Program, rated triple-A.

Yields ranged from 0.48% with a 5% coupon in 2015 to 3.70% with a 4% coupon in 2041. Credits maturing in 2013 and 2014 were not formally reoffered. The bonds are callable at par in 2021.

Wells Fargo Securities won the bid for $84.2 million of Knoxville, Tenn., GOs, rated Aa1 by Moody’s, AA-plus by Standard & Poor’s, and AAA by Fitch Ratings.

Yields ranged from 0.20% with a 1% coupon in 2013 to 2.50% with a 3% coupon in 2025. Credits maturing in 2014 and 2015 were not formally reoffered. The bonds are callable at par in 2021.

In the secondary market, trades reported by the Municipal Securities Rulemaking Board showed firming on the long end.

Bonds from an interdealer trade of Orange County, Fla., Health Facilities Authority 5s of 2042 yielded 4.29%, six basis points lower than where they traded Monday.

Bonds from an interdealer trade of California 5s of 2042 yielded 3.99%, four basis points lower than where they traded Monday.

Bonds from another interdealer trade of Puerto Rico public improvement 5s of 2041 yielded 4.86%, four basis points lower than where they traded Monday.

A dealer bought from a customer New Jersey Tobacco Settlement Financing Corp. 5s of 2041 at 6.64%, two basis points lower than where they traded Monday.

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