NEW YORK – The tax-exempt market is rallying, following Treasuries, after a perfect storm of bad news forced the risk-off trade.

“This is ugly,” a New York trader said. “It’s everything together,” he said, referring to bad news from JPMorgan and Europe that’s pushing fixed-income markets higher.

Indeed, munis were much firmer Monday morning, according to the Municipal Market Data scale. Yields on the four- to 10-year fell between one and three basis points while yields outside nine years dropped two to four basis points.

On Friday, the 10-year yield finished at 1.75% – just seven basis points above its record low of 1.68% set Jan. 31. The 30-year yield closed at 3.08% – touching its record low as recorded by MMD last Wednesday. The two-year yield remained steady at 0.31% for the 18th consecutive trading session.

Treasury prices soared on the long end in Monday morning trading. The benchmark 10-year yield and the 30-year yield each plummeted eight basis points to 1.77% and 2.94%, respectively. The two-year yield rose one basis point to 0.27%.

In the primary market this week, $7.18 billion in new issuance is expected, up from last week’s revised $5.81 billion. In the negotiated market, $5.51 billion is expected to come to market, up from last week’s revised $4.12 billion. On the competitive calendar, $1.67 billion is expected to be priced, down slightly from last week’s revised $1.69 billion.

Morgan Stanley is expected to price for retail $497.5 million of New York State Environmental Facilities Corp. state clean water and drinking water bonds for the New York City Municipal Water Finance Authority. The bonds are rated AAA by Standard & Poor’s.

In competitive deals, Georgia’s Metropolitan Atlanta Rapid Transit Authority is expected to auction $306.6 million of bonds, rated Aa3 by Moody’s Investors Service and AA-plus by Standard & Poor’s.

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