The tax-exempt market ended on weaker tone Tuesday, following Treasuries, with some primary deals taking concessions to get priced.

Still, many traders noted a relatively constructive tone in the market and said activity was better than expected given many market participants take vacation in August.

“Treasury markets are seeing a correction here and so the Municipal Market Data scale is seeing cuts between two and four basis points,” a Los Angeles trader said. “I would say the market tone is pretty good and constructive. There are deals in the market that are being done and we are seeing flows.”

He added traders are adjusting slightly to the cuts but volume is decent given it’s an August vacation week. “There are not a lot of balances on deals and the overall market is constructive.”

The trader said muni yields are following Treasury yields higher but that if you have the right bond a customer is looking for, you should be unaffected by Treasuries.

Tuesday morning, traders noted munis were weaker but activity had yet to pick up. “It’s quiet,” a New York trader said. “Munis are off. It’s weaker and slow.”

Munis finished weaker on Tuesday, according to the MMD scale. Yields inside five years were flat while yields outside six years rose between two and four basis points.

The 10-year and 30-year yields jumped four basis points each to 1.75% and 2.91%, respectively. The 10-year yield now remains 15 basis points off its record low of 1.60% set July 26. The 30-year yield is hovering 12 basis points off its record low yield of 2.79% set July 25. The two-year finished steady at 0.29% for the ninth consecutive session.

Treasuries were much weaker on Tuesday. The benchmark 10-year yield and the 30-year yield jumped seven basis points each to 1.63% and 2.72%, respectively. The two-year yield increased three basis points to 0.28%.

In the primary market, Bank of America Merrill Lynch priced its second day of retail of $850 million of New York City Transitional Finance Authority future tax-secured bonds and subordinate bonds, rated Aa1 by Moody’s Investors Service and AAA by Standard & Poor’s and Fitch Ratings.

Yields on the first series, $100 million of subordinate bonds, ranged from 0.53% with 2% and 4% coupons in a split 2015 maturity to 2.49% with a 2.5% coupon in 2026. Credits maturing in 2014 were offered via sealed bid. The bonds are callable at par in 2022. Yields were increased between three and five basis points from the first day of retail pricing Monday.

Yields on the second series, $750 million of future tax-secured subordinate bonds, ranged from 0.58% with a 5% coupon in 2015 to 3% priced at par and 2.86% with a 5% coupon in a split 2032 maturity. Bonds maturing in 2013 and 2014 were offered via sealed bid. Credits maturing between 2024 and 2027 and between 2029 and 2031 were not offered for retail. The bonds are callable at par in 2022. Yields were increased between three and five basis points from the first retail order period Monday.

In the competitive market, Washington auctioned $813.8 million of general obligation and refunding bonds in three pricings.

Bank of America Merrill Lynch won the bid for $380.4 million of motor vehicle fuel tax general obligation refunding bonds, rated Aa1 by Moody’s and AA-plus by Standard & Poor’s and Fitch. Yields ranged from 0.20% and 0.22% with 3% coupons in a split 2013 maturity to 3.25% with a 3.125% coupon in 2030. The bonds are callable at par in 2022.

Citi won the bid for $352.2 million of various purpose GO refunding bonds. Yields ranged from 0.20% with a 3% coupon in 2013 to 2.94% with a 4% coupon in 2030. The bonds are callable at par in 2022.

US Bancorp Investments won the bid for $81.2 million of certificates of participation, rated Aa2 by Moody’s. Yields ranged from 0.52% with a 3% coupon in 2013 to 3.31% with a 4% coupon in 2032. The bonds are callable at par in 2022.

Minnesota issued $658.5 million of GO bonds in three pricings, rated Aa1 by Moody’s and AA-plus by Standard & Poor’s.

JPMorgan won the bid for $422 million of GO-backed various-purpose bonds. Yields ranged from 0.18% with a 5% coupon in 2013 to 3.05% with a 3% coupon in 2032. The bonds are callable at par in 2022.

Wells Fargo Securities won the bid for $234 million of GO-backed trunk highway bonds. Yields ranged from 0.22% with a 5% coupon in 2013 to 3.08% with a 3% coupon in 2032. The bonds are callable at par in 2022.

Piper Jaffray won the bid for $2.5 million of taxable GO state bonds. The bonds had a 2% coupon maturing in 2017. Prices were not formally re-offered.

The deal was received well, according to Kristin Hanson, assistant commissioner for treasury and debt management at Minnesota Management and Budget. “We are very pleased with the number of bidders that participated and the aggressive bids we received. The state had nine or more bidders on each of its sales.”

In the secondary market, trades compiled by data provider Markit showed weakening. Yields on Massachusetts Bay Transportation Authority 5s of 2021 jumped six basis points to 1.83% while California’s Golden State Tobacco Securitization Corp. 5s of 2045 increased three basis points 4.17%. Yields on California 5s of 2042 and Triborough Bridge and Tunnel Authority 4s of 2029 each rose two basis points to 3.84% and 2.96%, respectively.

In other municipal bond news, the Municipal Securities Rulemaking Board released statistics on second quarter trading and reported par amount of trading totaled $844.5 billion, 3% higher than the $819.2 billion traded in the second quarter of 2011. It was the highest quarterly volume since the third quarter 2011.

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.