The tax-exempt market extended gains into a fifth consecutive session Monday, led by strong trading activity in such lower-rated credits as California general obligation bonds and tobacco debt.

Traders said higher-yielding debt traded more actively than high-grade bonds after last week’s rally left buyers searching for yield in lower-rated credits.

Following last week’s $2 billion California GO offering in the primary market, the debt was active in the secondary. Ohio’s Buckeye Tobacco Settlement Financing Authority bonds were almost the most traded with $24 million in transactions by afternoon, one Chicago trader said.

“There are quite a few big trades in interdealer and to customers and a bit firmer too,” he said. “Some are better by four basis points. It’s the second highest name traded today behind California GOs.”

On Monday, a customer sold to a dealer the Buckeye 5.875s of 2047 at 7.80%, down two basis points from where the bonds were sold earlier in the morning.

Other traders said the market was slow to get moving, with little motivation coming from the light supply expected this week.

“It’s dead this morning,” one New York trader said.

A second New York trader said a few more bid lists started to emerge as the morning progressed, but overall activity still felt light.

In the primary market Monday, Morgan Stanley priced for retail $300 million of Colorado Health Facilities Authority revenue bonds on behalf of SCL Health System. The bonds are rated Aa3 by Moody’s Investors Service and AA-minus by Standard & Poor’s and Fitch Ratings. Institutional pricing is expected Tuesday.

Yields ranged from 4.17% with a 4.125% coupon in 2027 to 5.08% with a 5% coupon in 2044. Bonds maturing in 2026 were priced at par to yield 4% in 2026. The bonds are callable at par in 2024.

The deal comes amid a drop off in supply this week. The market can expect $4.33 billion in deals, down from last week’s revised $7.43 billion. The negotiated market can expect $3.45 billion, down from last week’s revised $5.06 billion. On the competitive calendar, $877.5 million should be auctioned, down from last week’s revised $2.37 billion.

Looking ahead to Tuesday, Fifth Third Securities is expected to price $80 million of pension obligation bonds for Bloomfield Township, Mich., in the first public offering of pension debt under a new Michigan law allowing municipalities to borrow to cover the cost of their unfunded retirement liability.

Fifth Third issued indications of interest Monday afternoon on the triple-A rated general obligation limited tax pension obligation bonds.

Spreads ranged from 25 basis points to 225 basis points above the comparable Treasury yield with maturities ranging from 2014 to 2032. The bonds are callable at par in 2023.

One desk in Chicago said spreads looked cheap. Takedowns listed on the wire show between $2 a bond and $2.625 a bond.

In the secondary market, trades compiled by data provider Markit showed a mix of strengthening and weakening.

Yields on Oklahoma Development Finance Authority 5s of 2034 dropped 13 basis points to 4.65% and Pulaski County, Ark., Public Facilities Board 5.25s of 2033 slipped four basis points to 5.27%.

Yields on Pennsylvania 5s of 2027 and Puerto Rico Sales Tax Financing Corp. 5.75s of 2057 slid three basis points each to 3.35% and 6.27%, respectively.

Other trades were weaker. Yields on California’s Golden State Tobacco Securitization Corp. 5.75s of 2047 rose four basis points to 7.71%.

Yields on another CUSIP of COFINA 5.25s of 2019 increased three basis points to 5.28% and New York’s Metropolitan Transportation Authority 5s of 2042 rose two basis points to 4.83%.

On Monday, yields on the triple-A Municipal Market Data scale ended as much as three basis points stronger. The 10-year and 30-year yields fell one basis point each to 2.48% and 4.06%, respectively. The two-year was steady at 0.35% for the 12th session.

Yields on the Municipal Market Advisors benchmark scale ended as much as two basis points firmer. The 10-year slid one basis point to 2.63%. The two-year and 30-year yields were steady at 0.53% and 4.23%, respectively, for the second session.

Treasuries were slightly weaker. The benchmark 10-year and 30-year yields rose one basis point each to 2.52% and 3.61%, respectively. The two-year was flat at 0.32%.

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