NEW YORK – The tax-exempt market continued to gain Monday afternoon as traders who were out on Friday got caught up on the market. Participants said most of the stronger trades were in response to Friday’s flight to quality.

“There are not a lot of bonds out there,” a New York trader said. “In the secondary, there is some supply. But for the most part, the recent push in the last 24 hours has been reaction to the move on Friday that a lot of people weren’t able to take advantage of because they were out.”

Munis continued to gain Monday afternoon, according to the Municipal Market Data scale. Yields on the two- and three-year fell three to five basis points while the four- and five-year yields dropped five to seven basis points. Yields between the six- and 22-year fell the most, falling 10 to 12 basis points. Outside 23 years, yields plummeted seven to 10 basis points.

On Thursday, the two-year yield finished steady at 0.36% for its 14th consecutive trading session while the 30-year yield finished flat at 3.42% for its third trading session. The 10-year yield closed down four basis points at 2.12%.

Treasuries rallied. The two-year yield fell three basis points to 0.32% while the 30-year yield dropped 14 basis points to 3.19%. The benchmark 10-year yield plummeted 15 basis points to 2.03%.

In the primary market, Barclays Capital began its first day of retail for $800 million of New York City Transitional Finance Authority future tax-secured bonds and subordinate bonds, rated Aa1 by Moody’s Investors Service and AAA by Standard & Poor’s and Fitch Ratings. A second day of retail is expected Tuesday follow by institutional pricing Wednesday.

Yields ranged from 0.40% with 2.5% and 4% coupons in a split 2014 maturity to 3.90% with a 4% coupon in 2042. Credits maturing between 2023 and 2026, between 2028 and 2031, and in 2037 and 2041 were not offered for retail. The bonds are callable at par in 2022.

In the secondary market, trades reported by the Municipal Securities Rulemaking Board showed firming.

A dealer sold to a customer Minnesota Housing Finance Agency 3.45s of 2024 at 3.21%, 24 basis points lower than where they traded two week ago.

A dealer bought from a customer New York Liberty Development Corp. 5s of 2041 at 3.96%, 12 basis points lower than where they traded two weeks prior.

A dealer sold to a customer California 5.25s of 2014 at 1.05%, 10 basis points lower than where they traded two weeks before.

Another dealer sold to a customer South Carolina Public Service Authority 5s of 2043 at 3.89%, seven basis points lower than where they traded last Thursday.

Over the past week, muni-to-Treasury ratios have remained mostly flat, moving only slightly higher as munis underperformed and became comparatively cheaper. The 10-year muni yield to Treasury yield rose to 97.7% from 96.8% the week prior while the 30-year ratio jumped to 103% from 101.5%. The five-year ratio was flat, closing at 96% from 96.1% the week prior.

The slope of the yield curve steepened over the past week as investors moved out of the long end and into the short end. The one- to 30-year slope of the curve rose to 324 basis points from 321 basis points the week prior. The 10-year 30-year slope also jumped to 130 basis points from 126 basis points. Inside the 10-year, the sloped flattened to 194 basis points from 195 basis points.

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