The municipal bond market Tuesday afternoon is winding its way through a modest rally.

The Fourth of July holiday that slowed the market to a grinding halt last week gave it the opportunity to digest the healthy supply of new deals that preceded it. That, combined with June and July coupon payments, has laid a proper table for investor demand to build for this week's volume, a trader in San Francisco said.

"We're seeing pretty good buying," he said. "We're seeing a bid, we're seeing the market [down] three to five basis points today."

Tax-exempt yields have been mostly falling throughout the day, according to the Municipal Market Data scale. They're steady through two years.

Yields from three to 10 years are flat to two basis points lower. Beyond 10 years, they are down one to four basis points, and are strongest in the 13- to 20-year range.

The benchmark 10-year triple-A yield slipped two basis points in Monday's session to 1.80%. The 30-year fell three basis points on the day to 3.09%. The two-year started the week at 0.32%, holding for the 26th straight session.

Treasury yields, by comparison, crossed noon largely unchanged. The benchmark 10-year yield is steady at 1.52%.

The 30-year yield has also held its level at 2.62%. The two-year has ticked up one basis point to 0.28%.

"There's not a tremendous amount of selectivity out there," the trader in San Francisco said. "The folks that do have bonds are happy to hold onto them, and they're continuing to go with the flow of the market by marking [prices] up and just staying ahead of it. Some things are trading, but most things are just getting marked up."

Muni supply is expected to approximate pre-Independence Day levels this week, after recording particularly feeble issuance numbers last week due to the holiday falling mid-week.

Industry estimates predict $7.07 billion should reach the market. That compares with a meager $105.7 million of volume during the holiday week.

JPMorgan priced for retail $850 million of New York City Transitional Finance Authority building aid revenue bonds. They are rated Aa3 by Moody's Investors Service and AA-minus by Standard & Poor's and Fitch Ratings.

Yields range from 0.71% with coupons of 3.00% and 4.00% in a split maturity in 2015 to 4.05% with a 4.00% coupon in 2042. Debt maturing in 2014 was offered in a sealed bid.

No more retail orders are being accepted for credits maturing in 2024 through 2027, and 2028 through 2031, as well as in 2035 and 2040. The bonds are callable at par in 2022.

Bank of America Merrill Lynch priced $314.8 million of the Central Puget Sound Regional Transit Authority sales tax and motor vehicle excise tax refunding bonds and sales tax refunding bonds, in two series.

Bonds in the first series, $216.5 million of sales tax and motor vehicle excise tax refunding bonds, are rated Aa1 by Moody's and AAA by Standard & Poor's. Yields range from 0.34% with a 5.00% coupon in a split maturity in 2014 to 2.83% with a 5.00% coupon in 2028.

Debt maturing in 2013 is offered in a sealed bid. The bonds are callable at par in 2022.

Bonds in the second series, $98.3 million of sales tax refunding bonds, are rated Aa2 by Moody's and triple-A by Standard & Poor's. Yields range from 0.81% with a 5.00% coupon in a split maturity in 2016 to 3.37% with a 3.25% coupon in 2030.

The bonds are callable at par in 2022. Yields were the same as during Monday's retail order period.

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