The tax-exempt market posted gains on Wednesday for the second straight session as deals saw overwhelming demand from buyers.

Most deals were priced a day ahead of schedule, underwriters lowered yields, and some even increased the size of the deal all due to demand.

One Los Angeles trader said he was involved in the $367 million California Department of Water Resources deal and the almost $1 billion of California’s Bay Area Toll Authority issue. He said both deals are seeing huge demand allowing underwriters to increase deal sizes and accelerate pricing periods.

“Especially on the taxable side, we are seeing interest,” he said, adding due to demand underwriters bumped the Bay Area Toll Authority deal in size so it was a lot bigger than expected.

“The taxable side is interesting because yields have gone up a lot,” the Los Angeles trader added. “Spreads are dropping but yields themselves are actually rising. Issuers are paying more now than they were a few weeks ago.”

One trader tweeted taxable munis look attractive on a relative basis. “Corporate spreads are tighter and agency paper is ridiculous. Taxable munis look good.”

Another trader added the $550 million Omaha, Neb., Public Power District did very well in the retail order period. “I heard the Series B is going well today,” he said.

Most of the demand in the primary market is coming from cash on the sidelines, the Los Angeles trader said. “It seems like momentum. It’s hard to hold that cash. We are a few basis points stronger.”

One institutional trader in New York said the market was firmer. “There are buyers out there,” he said.

Indeed, the majority of issuance priced Wednesday. Morgan Stanley priced for retail and institutions $1.28 billion of New York’s Metropolitan Transportation Authority transportation revenue refunding bonds, rated A2 by Moody’s Investors Service and A by Standard & Poor’s and Fitch Ratings. Institutional pricing was originally expected Thursday.

Yields ranged from 0.28% with 2% and 4% coupons in a split 2013 maturity to 3.44% with a 4% coupon and 3.29% with a 5% coupon in a split 2030 maturity. Credits maturing in 2012 were offered via sealed bid. The bonds are callable at par in 2022. Yields were lowered as much as five basis points from retail pricing.

Bank of America Merrill Lynch priced for institutions $903.2 million of Bay Area Toll Authority San Francisco Bay Area toll Bridge revenue bonds, rated Aa3 by Moody’s, AA by Standard & Poor’s, and AA-minus by Fitch. A second retail order period was expected Wednesday but institutional pricing was moved up a day to take advantage of demand. The deal was also bumped up from the expected $716 million.

Yields ranged from 0.88% with 2% and 5% coupons in a split 2017 maturity to 3.20% with a 4% coupon and 2.88% with a 5% coupon in a split 2031 maturity. The bonds are callable at par in 2022. Yields were lowered seven and eight basis points on the short end from retail pricing.

Siebert Brandford Shank & Co. held a second retail order period for $570 million of Connecticut general obligation and GO refunding bonds, rated Aa3 by Moody’s and AA by Standard & Poor’s, Fitch, and Kroll Bond Rating Agency. Institutional pricing is expected Thursday. Prices on the second day of retail were not available by press time.

In the initial retail order period Tuesday, the first series, $175 million of GO SIFMA index bonds, were not offered.

Yields on the second series, $325 million of GOs, ranged from 1.79% with 2%, 3%, and 4% coupons in a split 2020 maturity to 3.15% with 3.125% and 4% coupons in a split 2032 maturity. Portions of bonds maturing between 2024 and 2032 were not offered for retail. The bonds are callable at par in 2022.

Bonds in the third series, $70 million of GO refunding bonds, yielded 0.36% with 3% and 4% coupons in 2014 and 0.48% with a 4% coupon in 2015. Bonds maturing in 2013 were offered via sealed bid.

Morgan Stanley priced $367 million of California Department of Water Resources Central Valley Project Water System revenue bonds, rated Aa1 by Moody’s and AAA by Standard & Poor’s.

Yields on the first series, $317.3 million of taxable bonds, ranged from 0.65% priced at par in 2015 to 3.5% priced at par in 2029.

Yields  on the second series, $49.7 million of taxable bonds, ranged from 0.24% with a 2% coupon in 2013 to 2.99% with a 5% coupon in 2035.

In the secondary market, trades compiled by data provider Markit showed mostly strengthening. Yields on Massachusetts Development Finance Agency 5s of 2040 plummeted nine basis points to 2.76% while Connecticut Health and Educational Facilities Authority 5s of 2042 plunged seven basis points to 1.92%.

Yields on Austin, Texas, Water and Wastewater System 5s of 2042 dropped five basis points to 3.28% while California 7.6s of 2040 fell three basis points to 5.11%.

On Wednesday, the 10-year Municipal Market Data yield and the 30-year yield each fell four basis points to 1.86% and 2.99%, respectively. The two-year closed at 0.29% for the 39th consecutive session.

The gains pushed muni yields back down to levels last seen on Sept. 13, erasing losses made over the past week.

The Treasury yield curve flattened Wednesday. The two-year yield increased rose basis point to 0.27%. The benchmark 10-year yield and the 30-year yield dropped three basis points each to 1.78% and 2.97%, respectively.

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