The municipal market treaded water Thursday as it absorbed the remains of a busy weekly calendar and investors reacted to the threat of a downgrade to junk status of about $52 billion of Puerto Rico bonds. Tax-exempt yields felt a shade higher Thursday as large deals arrived mostly priced to move, traders said. Participants also took note of a late-Wednesday report by Moody's Investors Service that placed on review for downgrade most of Puerto Rico's debt.

Yields for much the commonwealth's paper climbed in the secondary. Reports in the morning showed yields on Puerto Rico paper trading at least 15 basis points higher than they did one day earlier.

And they should climb more as the news sinks in for retail investors, a trader in New York said.

"Puerto Rico yields seemed to soften up a little bit more, with people concerned," he said. "It definitely seemed like there were a lot more bid-wanteds, certainly more volume in Puerto Rico. I'm not sure how much traded, though."

For the day, the new deals did little to affect yields, traders said.

"I was cheaper ever so slightly on everything I sold today because I wanted to make sure I got some trades done," the trader said. "The market's a little softer, a couple of ticks cheaper. Especially with the holidays coming, if people can't sell this week, they aren't so sure they can sell next week."

The market should expect more redemptions from mutual funds, a trader in Chicago said. "People thought they were buying a Connecticut fund, a Cal fund or a New York fund that didn't necessarily have Puerto Rico in it; now the cat's out of the bag," he said. "This may knock some people out of their fund, because they'll see their NAVs and want to get out."

The week's calendar still held investors' interest. In the negotiated market, Goldman, Sachs & Co. priced $573.4 million of Foothill/Eastern Transportation Corridor Agency toll road refunding revenue bonds in three series and an additional one of junior lien toll road refunding revenue bonds.

The three series, totaling $375 million of toll road refunding revenue bonds, are rated Ba1 by Moody's and BBB-minus by Standard & Poor's and Fitch Ratings. They are all structured as term maturities in 2053 with mandatory tender dates ranging from 2018 through 2023.

Yields in the three series include 2.75%, 3.875% and 4.875% with coupons of 5.00%, 5.00% and 5.50%, respectively.

The fourth series, $198.7 million of junior lien toll road refunding revenue bonds, is rated Ba1 by Moody's and BB-plus by S&P and Fitch. Yields range from 6.375% with a 6.25% coupon in 2033 to 6.625% with a 6.50% coupon in 2043.

Almost $1.22 billion of Empire State Development Corporation New York State Urban Development Corporation personal income tax general purpose revenue bonds reached the competitive market Thursday in taxable and tax-exempt deals. The bonds are all rated AAA by Standard & Poor's and AA by Fitch.

Bank of America Merrill Lynch won $571 million of Empire State Development Corp. New York State Urban Development Corp. personal income tax general purpose revenue bonds.

Yields ranged from 3.07% with a 5.00% coupon in 2024 to 4.50% with a 5.00% coupon in 2043. The bonds are callable at par in 2023.

JPMorgan won $251.9 million of Empire State UDC PITs. Yields ranged from 0.21% with a 2.00% coupon in 2015 to 2.82% with a 5.00% coupon in 2023.

JPMorgan also won about $396 million of taxable Empire State UDC PITs. Yields range from 0.25% priced at par in 2015 to 3.53% with a 3.45% coupon in 2023.

Bonds maturing between 2016 through 2023 were priced to yield between 25 and 75 basis points over comparable Treasuries.

In the secondary, trades compiled by data provider Markit painted a mixed picture.

Yields on Chicago O'Hare International Airport Revenue 5s of 2044 and Houston Independent School District 4s of 2033 dropped two basis points each to 5.11% and 4.13%, respectively. Yields on California GOs 5s of 2042 slipped one basis point to 4.81%.

Other trades were weaker. Yields on Wisconsin GOs 5s of 2019 and Golden State, Calif., Tobacco Securitization Corp 5.75s of 2047 inched up one basis point each to 1.70% and 8.06%, respectively.

Muni yields outperformed those of Treasuries mostly by standing still as the latter rose. Yields on the Municipal Market Data triple-A scale closed out the day's session unchanged, as they were Wednesday.

Muni yields ended Thursday flat for a second straight session, with the benchmark triple-A 10-year yield at 2.72%. The 30-year remained at 4.16%. The two-year held at 0.33% for a 20th straight session.

Yields on the Municipal Market Advisors benchmark triple-A scale weakened slightly on the long end of the curve Thursday. The 10-year and the two-year held at 2.75% and 0.36%, respectively. The 30-year yield ticked up one basis point to 4.40%.

Treasury yields weakened Thursday. The benchmark 10-year yield climbed four basis points to 2.89%, while the 30-year yield jumped five basis points to 3.90%. The two-year increased two basis points to 0.33%.

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