Monday’s light activity underscored the murky view participants have into the municipal market.

Sustained volatility, mixed messages from the Federal Reserve and a large calendar combined to discourage dealers from taking on risk and others to hold onto cash they have to spend until the week’s new volume arrived, traders said.

“We were barely open today,” a trader in California said. “People have been trying to make sense of cross-currents emanating from the Fed, from taper to 'the markets’ actions have been too dramatic.’ And now we’re trying to figure out what that means for new muni issuers given the capital flows: money continues to leave the muni product. So, there’s concern that they’re might not be a lot of fuel to take on the new issues.”

Though demand remains questionable, he added, it hasn’t withered completely, as there’s certainly relative value, if not absolute value. But the rally in equities has occupied the attention of investors.

A relatively heavy calendar should lure investors, though. This week, an estimated $9.65 billion of new volume is expected to price, Ipreo LLC and The Bond Buyer report.

That represents an increase from a revised $5.38 billion that arrived last week, according to Thomson Reuters. In the pole position sits a $2.9 billion Texas transportation deal expected from the Grand Parkway Transportation Corp.

Piper Jaffray held a second day of retail on $228 million of University of Connecticut general obligation bonds. The bonds were rated Aa3 by Moody’s Investors Service, AA by Standard & Poor’s, and AA-minus by Fitch Ratings.

Yields on the first series of $174.2 million ranged from 0.50% with a 3% coupon in 2015 to 4.32% with a 4.25% coupon in 2033. Bonds maturing in 2014, 2030 and 2032 were not offered for retail. The bonds are callable at par in 2023.

Yields were lowered as much four basis points at five and six years, and one or two basis points at the short and far ends the curve.

Yields on the second series of $53.9 million ranged from 0.40% with a 3% coupon in 2015 to 3.13% with a 4% coupon in 2024. Bonds maturing in 2014 were not offered to retail investors. The bonds are callable at par in 2023.

Yields were lowered as much as five basis points. Institutional pricing should be held Tuesday.

Secondary trades painted a mixed picture in the day’s session.

Yields on Knox-Chapman Tennessee Utility District 4s of 2040 decreased two basis points to 4.32%, and Johnson City Tennessee Health & Education Facilities Board 5s of 2042 rose four basis points to 5.09%.

Yields on California Health Facilities Financing Authority 5s of 2039 fell two basis points to 4.92%, while New York City GOs 5s of 2034 rose one basis point 4.18%.

Yields on Arizona State Lottery 5s of 2027 inched up a basis point to 3.78%. And Salt River Project Agricultural Impact & Power District, Ariz., 5s of 2029 held at 3.81%.

With a degree of volatility still in evidence, participants remain unsure where the market’s heading, a trader in Chicago said. And with the supply coming, there’s little excitement at dealer desks to take on much risk, he added.

Still, the trader said he sees some depth to the market. “The curve is fine; munis are cheap,” he said. Market volatility and uncertainty, as well as the expected bump in supply are “allowing them to stay cheap.”

Market fundamentals are looking up, Matt Fabian, managing director at Municipal Market Advisors, wrote in a research post.

Even with about $5 billion of weekly selling pressure in the secondary, enormous and continuous outflows from muni bond mutual funds, and a large calendar looming, yields have mostly held at levels set earlier this month, he wrote.

“It appears this support is coming from real-money buyers,” Fabian wrote. “There is, clearly, enough after-tax yield to draw in individuals and other tax aware investors and/or re-investors. By contrast, dealer inventories appear to be shrinking even though the start of a new quarter usually allows for more aggressive risk taking. While this could point to continuing uncertainty about near-term levels, it more likely shows underwriters more easily distributing the high grade sales last week (well-received Utah and Georgia loans) while making room for new issue activity in the next few weeks.”

What’s more, he added, bond prices and evaluations have a better chance of aligning the longer that yields remain somewhat stable, or even fall. This would make munis more liquid if a strong selling pressure returns.

“Near term, it is difficult to expect much of anything differently,” Fabian wrote, “but note that long-end weakness has finally created an agreement on value for buyers between MMA’s several valuation measures.”

Tax-exempt yields Monday mostly held across the curve, according to one market gauge. They ended two basis points lower at six and seven years.

The 10-year triple-A tax-exempt steadied at 2.66%, according to the Municipal Market Data scale read. The 30-year yield remained at 4.00%, while the two-year held at 0.45% for the third session.

Yields on the Municipal Market Advisors 5% scale ended mostly flat on Monday, falling one basis point at six years. The 10-year and 30-year yields held at 2.84% and 4.11%, respectively. The two-year remained at 0.54% for the third straight session.

Treasuries closed the day stronger across the curve. The benchmark 10-year yield dropped four basis points to 2.55%. The two-year yield slipped one basis point to 0.34% and the 30-year yield slid three basis points to 3.61%.

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