Unlike a typically slow Friday, the tax-exempt market showed signs of life with a California retail order period stealing focus and an active secondary market keeping traders busy.

One Los Angeles trader said he was participating in the $1.55 billion California various purpose general obligation bond deal. "We are having just OK retail interest," he said. "It could be huge outside of what we're seeing but with where the deal was priced and the spread, our retail guys are more interested in the secondary."

He added the deal wasn't necessarily coming in too expensive, but it's just not attractive enough to generate interest. The trader added the deal should firm up next week with the institutional order period.

"Overall thought it's been a good week," he said. "There just isn't a lot of supply so deals should attract interest."

RBC Capital Markets priced for retail the $1.55 billion of California various purpose GO and refunding bonds, rated A1 by Moody's Investors Service and A-minus by Standard & Poor's and Fitch Ratings.

Yields on the first series, $1 billion of various purpose GOs, ranged from 0.59% with 2% and 3% coupons in a split 2014 maturity to 3.75% with a 5% coupon in 2042. Bonds maturing in 2013 were offered via sealed bid. Portions of credits maturing in 2036 and 2042 were not offered for retail. The bonds are callable at par in 2022.

Yields on the second series, $550.3 million of various purpose GO refunding bonds, ranged from 0.59% with a 4% coupon in 2014 to 2.76% with a 5% coupon in 2027. Credits maturing in 2013 were offered via sealed bid. Bonds maturing in 2025, 2026, and between 2028 and 2030 were not offered for retail. Bonds maturing between 2025 and 2030 are callable at par in 2018.

On Thursday, the 10-year Municipal Market Data yield plunged five basis points to 1.81% while the 30-year yield fell four basis points to 2.95%. The two-year closed at 0.29% for the 40th consecutive session.

The gains pushed muni yields back down to levels last seen on Sept. 11, erasing losses and then some after the Fed announced QE3.

Treasuries were stronger Friday afternoon. The benchmark 10-year yield dropped two basis points to 1.76% while the 30-year yield fell one basis point to 2.95%. The two-year was steady at 0.27%.

In the primary next week, the municipal market can expect $7.70 billion to be issued, up from this week's revised $7.36 billion. In the negotiated calendar, $6.37 billion is expected to be priced, on par with this week's revised $6.37 billion. On the competitive calendar, $1.33 billion is expected to be auctioned, up from this week's revised $988.8 million.


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