The tax-exempt market ended firmer on Wednesday as primary deals were very well received and a stronger Treasury market buoyed most fixed income markets.

The biggest news to hit the market Wednesday afternoon was the Federal Open Market Committee minutes from the July 31 meeting showing the Fed is considering additional quantitative easing sometime soon.

While some members of the committee said a new purchase program might "boost business and consumer confidence," others "questioned the possible efficacy of such a program under present circumstances, and a couple suggested that the effects on economic activity might be transitory."

Michael Gregory, senior economist at BMO Capital Markets Economics said, "Although the FOMC announced no new actions, we judged at the time that they opened the door wider for more easing moves in subsequent meetings," adding the minutes showed the FOMC will closely monitor incoming information on economic and financial developments and will provide additional accommodation as needed.

"If data releases over the subsequent six weeks continued their theme of ebbing momentum, that's all the additional economic evidence the Fed would require to act," he added. "What's on the ground now is neither sufficiently substantial nor sufficiently sustainable to dissuade the Fed from easing further."

After the minutes were released, Treasuries didn't immediately react. But overall for the day, the benchmark 10-year yield plummeted 11 basis points to 1.70% while the 30-year yield plunged 10 basis points to 2.81%. The two-year yield fell two basis points to 0.28%.

Munis followed Treasuries higher but were focused more on primary issuance.

"It's stronger today by about two or three basis points," a New Jersey trader said. "There is interest in anything that shows yield and everyone is chasing yield. Since the market has backed up in the last week, some things are a tad cheaper, so there is a lot of interest in deals."

The trader noted smaller deals, such as the $19.8 million Maryland Health and Higher Educational Facilities Authority revenue bond deal for Goucher College was heavily oversubscribed. "There hasn't been all that much specialty paper with yield attached to it in the primary so that drives a lot of interest as well."

Other traders also noted the market was higher. "We are pushing them up a couple of basis points," a New York trader said. "There are a few new deals that are being priced and things are getting more aggressive. Deals that are being priced are getting done."

To be sure, a few deals are being repriced higher, and this trader said if they continue this uptrend, he won't participate. "We are starting to lose interest if they are being pushed too much."

"By most accounts the new issues were well received and underwriters weren't forced to cheapen to get them done," wrote Dan Toboja at Ziegler Capital Markets.

In the primary market, Citi priced $443.3 million of Chicago O'Hare International Airport passenger facility charge revenue refunding bonds in two series, rated A-minus by Standard & Poor's and A by Fitch Ratings. The first series consists of $113.7 million, and the second series of $329.6 million subject to the alternative minimum tax. Pricing details were not available by press time.

Indeed, the New Jersey trader said the credit was seeing interest. "It's subject to the alternative minimum tax and you haven't seen that in a while so that appeals to insurance companies and they can get blocks there they haven't been able to get in prior deals."

Another trader said he wasn't involved in the deal but the trader said a friend on the retail desk reported the issue was seeing decent demand and the combination of the higher yielding credit and that it's subject to the AMT produces yields not seen lately.

"There is not huge supply, but I like the 5s of 2022 at 3.22% as long as AMT isn't an issue," this trader tweeted.

JPMorgan priced $285.3 million of Arizona Health Facilities Authority hospital revenue refunding bonds, for the Phoenix Children's Hospital, rated BBB-plus by Standard & Poor's.

Yields ranged from 1.65% with a 2% coupon in 2015 to 4.59% with a 5% coupon in 2042. The bonds are callable at par in 2022.

RBC Capital Markets priced $250 million of Los Angeles County Metropolitan Transportation Authority proposition A first tier senior sales tax revenue refunding bonds, rated Aa2 by Moody's Investors Service and AAA by Standard & Poor's. Pricing information was not available by press time.

On Wednesday, the 10-year Municipal Market Data yield and the 30-year yield dropped three basis points each to 1.87% and 2.99%, erasing Tuesday's losses. The two-year closed at 0.29% for the 20th straight session.

In the secondary market, trades compiled by data provider Markit showed strengthening. Yields on North Texas Tollway Authority 5s of 2042 plunged five basis points to 3.88% while San Joaquin County, Calif., Transportation Authority 5.25s of 2031 dropped four basis points to 2.90%.

Yields on New Jersey's Tobacco Settlement Financing Corp. 4.75s of 2034 fell three basis points to 6.30% while New Mexico State Hospital Equipment Loan Council 4s of 2042 dropped one basis point to 4.09%.

Many traders noted the secondary was fairly quiet as focus remained on the primary. "There is mostly interdealer business in the secondary," the New Jersey trader said.

Ziegler's Toboja agreed. "As has been the story for most of this year market participants are almost entirely focused on the new issue calendar and are less inclined to engage on the secondary."

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