The tax-exempt market continued to take a beating for the third consecutive session as issuers postponed new deals. Borrowers that braved the market paid a steep price.

In the afternoon trading session, market participants said the market felt worse than last Thursday and Friday and yields were up at least 20 basis points outside 10 years.

"It's worse today," a Chicago trader said. "We are buying today at levels that are 200 basis points cheaper than a month ago on the 10-year." In odd-lot trading, he bought a double-A 15-year 4.75% coupon bond at 5%.

"There are good deals now and it's definitely getting cheaper. Retail is starting to dip their toes in but with the institutional selling and the size of the calendar it won't make a difference. It's ugly out there and getting worse."

Triple-A rated Georgia was expected to auction $157 million of refunding bonds in the competitive market Wednesday. The deal was postponed. RBC Capital Markets also announced it had postponed $129 million of Pennsylvania Housing Finance Authority mortgage revenue bonds expected to price Wednesday.

Citi priced deals with trepidation and sold for retail $395 million of New York State Environmental Facilities Corp. state clean water and drinking water revolving funds for New York City Municipal Water Finance Authority projects. The bonds are rated Aaa by Moody's Investors Service, AAA by Standard & Poor's, and AA-plus by Fitch Ratings. Institutional pricing is expected Tuesday.

Yields ranged from 0.68% with 3% and 5% coupons in a split 2015 maturity to 4.375% priced at par and 4.24% with a 5% coupon in a split 2033 maturity. Bonds maturing in 2014 were offered via sealed bid. The bonds are callable at par in 2023.

Yields on bonds with 5% coupons were priced 25 basis points to 55 basis points above Friday's Municipal Market Data scale.

Citi also issued a pre-marketing wire for $532.3 million of Michigan State Building Authority revenue and revenue refunding bonds, rated Aa3 by Moody's, A-plus by Standard & Poor's, and AA-minus by Fitch.

Yields ranged from 1.33% with a 5% coupon in 2015 to 5.375% with a 5.25% coupon in 2047. Bonds maturing in 2014 were offered via sealed bid. The bonds are callable at par in 2023. The bonds were marketed at 90 basis points to 148 basis points above the MMD scale.

Friday, on the Municipal Market Data scale ended as much as 18 basis points higher. The 10-year yield jumped 15 basis points to 2.63% and the 30-year yield spiked 18 basis points to 3.96%. The two-year yield increased six basis points to 0.43%.

Yields on the Municipal Market Advisors 5% scale closed as much as 20 basis points higher. The 10-year jumped 18 basis points to 2.78% and the 30-year yield spiked 20 basis points to 4.08%. The two-year yield rose three basis points to 0.50%.

Treasuries continued to weaken, though less so than their tax-exempt counterparts. The benchmark 10-year yield jumped seven basis points to 2.58%. The two-year and 30-year yields rose three basis points each to 0.40% and 3.60%, respectively.

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