NEW YORK – The tax-exempt market continued its free fall, following Treasuries, as the biggest deal of the weak was priced for institutions.

“I’m hitting down big bids,” a New York trader said. “I think it’s a 10 to 15 basis point cut.”

Munis continued to weaken Wednesday afternoon, according to the Municipal Market Data scale. Two- to three-year yields rose one to three basis points while the four-year yield rose five to seven basis points. The five-year yield spiked eight to 10 basis points while yields on six- to 16-years jumped between eight and 12 basis points. Outside 17 years, yields increased five to nine basis points.

On Tuesday, the two-year yield closed steady at 0.27% for its fourth consecutive trading session, remaining one basis point above its record low. The 10-year yield and 30-year yield each jumped two basis points to 2.04% and 3.31%.

Treasuries continued to fall. The two-year yield rose five basis points to 0.40%. The benchmark 10-year and the 30-year yields rose 14 basis points to 2.27% and 3.40%.

In the primary market, Bank of America Merrill Lynch priced for institutions $780.1 million of New York State Thruway Authority second general highway and bridge trust fund bonds, rated AA by Standard & Poor’s and Fitch Ratings, following a retail order period Tuesday.

Yields ranged from 0.47% with 3% and 5% coupons in a split 2014 maturity to 3.50% priced at par and 3.47% with a 5% coupon in a split 2032 maturity. The bonds are callable at par in 2022.

Bank of America Merrill Lynch priced for institutions $206 million of Dormitory Authority of the State of New York bonds for New York University, following a retail order period Tuesday. The credit is rated Aa3 by Moody’s Investors Service and AA-minus by Standard & Poor’s. Pricing information was not yet available.

In the competitive market, Boston auctioned nearly $240 million of general obligation bonds in three deals, rated Aaa by Moody’s and AA-plus by Standard & Poor’s.

Bank of America Merrill Lynch won the $122 million. Yields ranged from 0.30% with a 5% coupon in 2014 to 3.40% with a 4% coupon in 2032. Credits maturing in 2013, 2015, and between 2018 and 2022 were sold but not available. The bonds are callable at par in 2022.

JPMorgan won the bid for $88 million and Bank of America Merrill Lynch won the bid for $28.2 million. Details were not available.

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