Activity in the tax-exempt market picked up steam Thursday as munis rallied across the board and extended their steady to firmer tone for the ninth consecutive trading session.

After a quiet Wednesday due to the Jewish holiday, traders struggled to get back to work Thursday morning, but increased the participation rate by the afternoon.

Munis continued to firm as demand outweighed supply. "I'm seeing ridiculously high prints inside of 15 years because of the lack of source for bonds and customers aren't showing bonds out," a North Carolina trader said. "So if you want to be involved, you have to pay the number. Otherwise you'll stare at whatever credit is trading tighter from Wednesday and tremendously tighter from Tuesday."

This trader added that while next week's supply numbers aren't available yet, he does not think it will be enough to offset recent demand. "It's hard to imagine getting cheaper regardless of what Treasuries do," he said. "I can't imagine next week will be enough to fill inquiries people have inside of 20 years."

He added activity is up across the board. "There are a lot of dealer to dealer trades. There is a lot of going away business on larger blocks and smaller pieces from money managers. But, a lot of that activity is not necessarily being quoted in the street. Everything has a situation going on."

Until the rest of the week's primary deals priced on Thursday, activity was sluggish. "It's a little quiet today," a New York trader said. "There is not much going on yet."

And while a majority of the deals in the primary priced Monday and Tuesday, a few big names waited to price Thursday.

RBC Capital Markets priced the biggest deal of the week, $2 billion of Port Authority of New York and New Jersey taxable consolidated bonds, rated Aa3 by Moody's Investors Service and AA-minus by Standard & Poor's and Fitch Ratings. Prices were not available by press time.

Bank of America Merrill Lynch priced for institutions $384.4 million of Port of Oakland, Calif., senior lien and refunding revenue bonds, rated A2 by Moody's and A-plus by Standard & Poor's and Fitch.

Yields in the first series, $380.8 million of refunding revenue bonds subject to the alternative minimum tax, ranged from 0.58% with a 2% coupon in 2014 to 3.88% with a 3.75% coupon and 3.64% with a 5% coupon in a split 2033 maturity. The bonds are callable at par in 2022.

Bonds in the second series, $3.6 million of refunding revenue bonds, yielded 0.42% with a 2% coupon in 2014.

PNC Capital Markets priced for institutions $169 million of Allegheny County, Pa., general obligation bonds, rated A1 by Moody's and A-plus by Standard & Poor's. The first series consists of $115 million of GO debt followed by $54 million of refunding bonds. Pricing details were not yet available.

In the competitive market, Massachusetts auctioned $1.2 billion of short-term notes in two pricings of $600 million each. The notes are rated MIG-1 by Moody's, SP-1-plus by Standard & Poor's, and F1-plus by Fitch.

The first pricing of $600 million was bought by three firms. Morgan Stanley won the bid for $450 million, JPMorgan won the bid for $100 million, and Jefferies & Co. won the bid for $50 million. Each series had a 2% coupon maturing in 2013 and prices were not formally re-offered.

The second pricing of $600 million was bought by five firms. Citi won the bid for three series of $50 million each and Jefferies won the bid for two series of $50 million each. JPMorgan bought one series of $200 million, Fidelity won $50 million, and Wells Fargo Securities bought one series of $100 million. Each series had a 2% coupon maturing in 2013. Notes were not formally re-offered.

In the secondary market, trades compiled by data provider Markit showed gains. Yields on Massachusetts 5.5s of 2018 plunged eight basis points to 0.96% while Indiana Finance Authority 5.5s of 2045 dropped four basis points to 4.66%.

Yields on Arizona Health Facilities Authority 5s of 2042 fell three basis points to 4.38%. Yields on Los Angeles Department of Water and Power 5s of 2024 and Chicago water revenue 5s of 2031 fell two basis points each to 2.12% and 2.99%, respectively.

On Thursday, the 10-year and 30-year Municipal Market Data yields fell two basis points each to 1.71% and 2.88%, respectively. The two-year closed flat for the third session at 0.30%.

Since the most recent rally streak began Sept. 17, the 10-year MMD yield has plunged 22 basis points from 1.93% while the 30-year yield has plummeted 18 basis points from the 3.06% where it traded on Sept. 17.

The 10-year yield is now at its lowest since Aug. 6 when it last touched 1.71%. It hovers only 11 basis points above its record low of 1.60% set July 26.

The 30-year yield is at its lowest since Aug. 6 when it yielded 2.87%. It hovers only nine basis points above its 2.79% record low yield hit July 25.

The Treasury yield curve steepened Thursday as yields on the long end rose. The benchmark 10-year yield rose two basis points to 1.64% while the 30-year yield jumped three basis points to 2.82%. The two-year yield fell one basis point to 0.25%.

Subscribe Now

Independent and authoritative analysis and perspective for the bond buying industry.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.