The tax-exempt market softened Wednesday afternoon as the largest deal of the week, $680.6 million of triple-A rated Maryland general obligation bonds, came in as much as four basis points off the Municipal Market Data scale.

Traders were looking to the Maryland deal as a bellwether for the market. While yields came in higher than Tuesday's MMD scale, traders said the overall market was cheapening along with it.

"The 10-year spot of the Maryland deal looks about four basis points off but the MMD curve is four to five basis points off too," a Virginia trader said. "With Treasuries backing up, there's definitely a softer tone out there today. It looks like it's pushing Maryland to come cheaper."

The deal came in two parts: $500 million and $180.6 million.

Citi won the bid for $500 million of state and local facilities loan GOs. Yields ranged from 0.43% with a 5% coupon in 2016 to 2.95% with a 3% coupon in 2028. The bonds are callable at par in 2021. Maturities with a 5% coupon were priced flat to four basis points higher than the MMD scale on Tuesday.

JPMorgan won the bid for $180.6 million. The bonds had a 4.5% coupon and maturities from 2014 to 2021. Prices were not yet available.

Outside the Maryland deal, the trader said the overall market continued to face headwinds. "I think it certainly does not help to have a 30-day visible supply at $11 billion, but this week's calendar is manageable." Still, this trader added that California was making headlines by announcing additional issuance in the coming weeks.

"Whenever you have Treasuries backing up and muni supply increasing at the same time, you get a multiplier effect and munis weakening a little bit," he added. "If we continue to get an uptick supply from here and Treasury softness, you could see munis underperform."

In other deals expected Wednesday, Raymond James plans to price $400.5 million of Virginia Housing Development Authority homeownership mortgage bonds, rated Aa1 by Moody's Investors Service and AA-plus by Standard & Poor's.

Citi priced for institutions $400 million of Connecticut general obligation bonds, rated Aa3 by Moody's and AA by Standard & Poor's and Fitch Ratings. The bonds are also rated AA by Kroll Bond Ratings. Institutional pricing was not yet available.

In retail pricing Tuesday of $200 million of GOs, yields ranged from 1.07% with a 2% coupon in 2019 to 3.30% priced at par and 3.07% with a 4% coupon in a split 2033 maturity. The bonds are callable at par in 2023.

Overall, municipal bond market scales ended weaker Tuesday for the second straight session.

Yields on the Municipal Market Data triple-A GO scale ended as much as four basis points higher. The 10-year yield jumped four basis points to 1.83% while the 30-year yield increased three basis points to 2.94%. The two-year closed at 0.31% for the 11th straight session.

Yields on the Municipal Market Advisors 5% coupon triple-A benchmark scale closed as much as three basis points higher. The 10-year and the 30-year yield jumped three basis points each to 1.85% and 3.01%, respectively. The two-year was steady at 0.33% for the sixth session.

Treasuries continued to weaken Wednesday afternoon. The benchmark 10-year yield jumped four basis points to 1.94% while the 30-year yield rose five basis points to 3.15%. The two-year yield increased one basis point to 0.26%.

Subscribe Now

Independent and authoritative analysis and perspective for the bond buying industry.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.