The tax-exempt market remained fairly quiet Thursday after a very slow Wednesday, though traders noted the muni market was starting to get off life support after Hurricane Sandy.

Thursday was the second full day the bond market was open after a full close Tuesday and an early close Monday.

Traders said the market was picking up a little steam with some deals pricing Thursday.

"It's still slow, but most of the smaller healthcare deals are going well," a Chicago trader said. "We bumped ours and the rest seem to be doing fine too. Customers are looking to get reengaged but with so much of the market's recent activity based on the primary we really need these deals to come so trading can resume."

He added for the most part, trading activity won't pick up until after the election. "I really think it'll be post-election before we have a significant move one direction or another."

A second trader said munis were picking up steam, though trading was still steady. "Munis are trading a little bit," a New York trader said. "It's pretty flat though. But it's better than yesterday."

In the primary market, Morgan Stanley priced and repriced $355.1 million of East Bay Municipal Utility District, Calif. water system revenue refunding bonds, rated Aa1 by Moody's Investors Service, AAA by Standard & Poor's, and AA-plus by Fitch Ratings.

Yields ranged from 0.19% with a 2% coupon in 2013 to 2.26% with a 5% coupon in 2026. The bonds are callable at par in 2022 except for credits maturing in 2023 which are not callable.

JPMorgan priced $48.7 of additional East Bay Municipal Utility District water system revenue refunding bonds, rated Aa1 by Moody's, AAA by Standard & Poor's, and AA-plus by Fitch.

Yields ranged from 0.53% with a 5% coupon in 2014 to 0.83% with a 5% coupon in 2021.

Jenny Poree, principal at financial advisor Montague DeRose, said the deal went extremely well and was one of the first major deals to price after Hurricane Sandy.

Poree said it was almost two times oversubscribed and yields were lower to the Municipal Market Data scale than the last time the issuer came to market. East Bay MUD was also able to significantly lower  its swap exposure.

"It certainly was a challenging time to price two deals," said Eric Sandler, finance direction of the authority. "However, despite the serious storm impacts, the combination of the district's strong credit and a solid underwriting team helped generate significant investor demand. Most importantly, these transactions provided significant savings and cost-effectively reduced risk for the District's ratepayers."

In the secondary market, trades compiled by data provider Markit showed mostly strengthening. Yields on Tobacco Securitization Authority of Southern California 5s of 2037 dropped nine basis points to 6.30% while yields on Dallas, Texas, 5s of 2024 fell three basis points to 2.09%.

Yields on Fontana, Calif., Unified School District 5s of 2018 and Jacksonville Electric Authority 5s of 2039 fell one basis point each to 1.27% and 3.25%, respectively.

On Thursday, the Municipal Market Data scale ended steady. The 10-year muni yield and the 30-year yield were flat at 1.72% and 2.82%, respectively, for the third session. The two-year remained at 0.30% for the 26th straight trading session.

Treasuries were weaker as stocks climbed higher. The benchmark 10-year yield jumped three basis points to 1.72% while the 30-year yield increased two basis points to 2.89%. The two-year yield fell one basis point to 0.28%.

Analysts at Moody's said many municipalities may be affected by the hurricane and their liquidity could be tested. In a recent note, analysts noted that local governments face credit negative risk due to unbudgeted costs for flood control, cleanup, sheltering evacuees, emergency services, and rebuilding damaged infrastructure.

"In extreme cases, strains on liquidity could occur if recovery costs exceed budget and federal reimbursements are delayed," the analysts wrote. "Public transit systems may be particularly challenged because they face large cleanup costs in addition to lost revenue during the period in which they are inoperable."

Fortunately, U.S. municipal issuers have an extremely strong track record of recovering from natural disasters without impairments to bondholder, Moody's wrote. "The immediate disruptions of these disasters tend to cause short-term liquidity problems but subsequent spending from insurance, federal aid, state support and private charitable donations is very simulative for local and regional economies."

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