NEW YORK – Activity in the tax-exempt market was up Wednesday morning after a quiet session Tuesday as fears from Europe pushed Treasury yields to new record lows. Munis traders were forced to act on the news, although some traders said muni yields weren’t necessarily following Treasury yields lower.

“It’s kind of odd but munis are not really rallying all that much,” a New York trader said. “In fact some people are cutting.”

He added traders aren’t necessarily cleaning out their books by selling, but that “munis are just not strong.”

To be sure, munis were stronger in morning, according to the Municipal Market Data scale. Yields between the five and 20-year fell as much as two basis points. Outside 21 years, yields dropped between one and three basis points.

On Tuesday, the 10-year yield and the 30-year yield closed flat for the fifth consecutive trading session at 1.83% and 3.14%. The two-year yield also closed steady at 0.33% for the fifth consecutive trading session.

Treasuries were much stronger Wednesday morning. The benchmark 10-year yield fell nine basis points, setting a new record low of 1.65%. The 30-year yield plummeted 10 basis points to 2.74%. The two-year yield dropped one basis point to 0.29%.

In the primary market, Jefferies & Co. is expected to price for institutions $242 million of Massachusetts Water Pollution Abatement Trust state revolving fund bonds in two parts - $146 million new money and $96 million of refunding bonds. The credit is rated triple-A from all three major rating agencies.

In retail pricing Tuesday, yields on the $146 million portion ranged from 0.35% with a 2% coupon in 2014 to 4.00% with a 4% coupon in 2042. Credits maturing in 2013 were offered via sealed bid. The bonds are callable at par in 2020.

On the competitive calendar, New York’s Triborough Bridge and Tunnel Authority is expected to auction $225 million of refunding bonds, rated Aa3 by Moody’s Investors Service and AA-minus by Standard & Poor’s.

 

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