The tax-exempt market continued to gain Thursday afternoon even as traders said the market seemed overbought.

Most traders on Thursday said they were surprised munis continued to gain after strong sessions earlier in the week.

"I am not sure why they are still strong," a San Francisco trader said. "I know they [follow'] Treasuries but we've seen a few real strong days."

He added a still relatively small new-issue calendar could be the driving force. "It could be limited issuance or higher taxes, but I think we are still waiting to see what is happening with the cap on tax-exemption and you'd think that would cheapen things up but it hasn't."

Even with a few deals hitting the primary market Thursday, there was still a lot of activity in the secondary. "We are still focused on the secondary mostly," the trader said. "There are a couple deals coming through but I'm just not finding that structure I like."

In the primary market, Jefferies & Co. priced for institutions $903.7 million Metropolitan Transportation Authority's Triborough Bridge and Tunnel Authority refunding bonds, following retail pricing Wednesday. The bonds were expected to price this past December, but were postponed due to market conditions.

The sale included $656 million of subordinate revenue refunding bonds, rated A1 by Moody's Investors Service, A-plus by Standard & Poor's and Fitch Ratings, and AA-minus by Kroll Bond Rating Agency.

Yields ranged from 0.40% with a 2% coupon in 2014 to 3.20% with a 3.125% coupon in 2032. The bonds are callable at par in 2023.

The sale also contained $247.7 million of general revenue refunding bonds, rated Aa3 by Moody's, AA-minus by Standard & Poor's and Fitch, and AA by Kroll.

Yields ranged from 1.20% with 4% and 5% coupons in a split 2019 maturity to 2.62% with a 5% coupon in 2030. The bonds are callable at par in 2023.

Wells Fargo Securities priced $210.7 million of triple-A rated Mecklenburg County, N.C., general obligation refunding bonds.

Yields ranged from 0.18% with a 2% coupon in 2013 to 2.26% with a 5% coupon in 2027.

In the competitive market, Wells Fargo Securities won the bid for $306.1 million of Florida Department of Transportation revenue bonds, rated Aa3 by Moody's and AA-minus by Standard & Poor's and Fitch.

Yields ranged from 0.25% with a 3% coupon in 2013 to 3.625% with a 3.5% coupon in 2042. The bonds are callable at par in 2022.

The Municipal Market Data scale ended stronger Wednesday for the third consecutive session. The 10-year yield dropped four basis points to 1.69% while the 30-year yield fell three basis points to 2.80%. The two-year yield dropped two basis points to 0.34%.

Treasuries recouped most of the morning losses but were still slightly weaker in afternoon trading. The benchmark 10-year yield rose three basis points to 1.89%. The two-year and 30-year yield increased one basis point each to 0.26% and 3.07%, respectively.

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