The tax-exempt market continued to firm Tuesday morning after an overall risk off trade pushed bonds higher Monday.

Municipal bond posted weeks of losses and finally caught a break this week with fears over the Eurozone resurfacing following the Cyprus turmoil.

"The market is firmer today," a New York trader said, adding the market was focused on the primary though many of the deals had not yet priced. "There are not a lot of new deals yet," he said.

Wells Fargo Securities is expected to take retail orders for a second day on $900 million of New York City Transitional Finance Authority tax-exempt, future tax-secured subordinate revenue bonds, rated Aa1 by Moody's Investors Service and AAA by Standard & Poor's and Fitch Ratings. Institutional pricing is expected Wednesday.

In the first retail order period Monday, yields on the first series, $650 million of tax-exempt subordinate bonds, ranged from 0.54% with a 4% coupon in 2016 to 3.83% with a 4% coupon in 2039. Bonds maturing in 2015 were offered via sealed bid. Credits maturing between 2025 and 2030 were not offered for retail. The bonds are callable at par in 2023.

Yields on the second series, $72 million of future tax secured tax-exempt subordinate bonds, ranged from 0.44% with a 4% coupon in 2015 to 2.95% with a 5% coupon in 2028. Credits maturing in 2013 and 2014 were offered via sealed bid. The bonds are callable at par in 2023.

Yields on the third series, $178 million of future tax secured tax-exempt subordinate bonds, ranged from 0.44% with a 4% coupon in 2015 to 3.45% with a 3.25% coupon in 2031. Credits maturing in 2014 were offered via sealed bid. The bonds are callable at par in 2023.

Barclays is expected to price for institutions $421.6 million of State Public Works Board of California lease revenue bonds in a three-pronged deal, rated A2 by Moody's, A by Standard & Poor's, and BBB-plus by Fitch.

In retail pricing Monday, yields on the first series, $332.6 million of lease revenue bonds for the Judicial Council of California, ranged from 1.06% with a 3% coupon in 2017 to 4.125% coupon priced at par in 2033. Bonds maturing between 2027 and 2029, in 2031, 2032, and 2038 were not offered for retail. The bonds are callable at par in 2023.

Yields on the second series, $13.6 million of lease revenue bonds for the Department of Corrections and Rehabilitation, ranged from 0.56% with a 2% coupon in 2015 to 3.90% with a 3.75% coupon in 2028. Credits maturing in 2014 were offered via sealed bid. The bonds are callable at par in 2023.

The third series, $75.4 million of lease revenue bonds for the Regents of the University of California, were rated Aa2 by Moody's, AA-minus by Standard & Poor's and AA by Fitch. Yields ranged from 0.81% with a 2% coupon in 2017 to 3.84% with a 3.75% coupon in 2033. Bonds maturing in 2038 were not offered for retail. The bonds are callable at par in 2023.

Bank of America Merrill Lynch is expected to price $315.4 million of Arizona School Facilities Board taxable state school improvement revenue refunding bonds, rated triple-A.

In the competitive market, New Mexico auctioned $126.9 million of GOs, rated Aaa by Moody's and AA-plus by Standard & Poor's.

One trader located in New Mexico tweeted, "New Mexico deal is turning into a food fight."

Later Tuesday, triple-A rated Howard County, Md., should auction $138 million of GOs.

On Monday, yields on municipal bond market scales ended lower for the first time in several weeks.

Yields on the Municipal Market Data triple-A GO scale ended as much as four basis points lower. The 10-year and 30-year yields fell three basis points each to 1.97% and 3.11%, respectively. The two-year finished flat at 0.31% for the 20th consecutive session.

Yields on the Municipal Market Advisors 5% coupon triple-A benchmark scale ended as much as three basis points lower. The 10-year and 30-year yields fell two basis points each to 2.01% and 3.20%, respectively. The two-year held at 0.33% for the 15th session.

Treasuries continued to strengthen Tuesday afternoon. The benchmark 10-year yield dropped three basis points to 1.92% while the 30-year yield plummeted five basis points to 3.14%. The two-year was steady at 0.25%.

In economic news, housing starts rose 0.8% to a seasonally adjusted annual rate of 917,000 in February while permits surged 4.6% to 946,000.

February starts beat the 915,000 expected by economists. Permits were above the 925,000 economists had predicted.

"It can often be hard to separate signal from noise in housing starts during the winter months but the upward trend in starts and permits is unmistakable," wrote economists at RDQ Economics. "Through a monthly saw-tooth pattern, the upward trend line in building permits has been clear since the bottom in February 2011 and permits have risen by 76.5% over this period. The increase in housing starts, at 77.0% over the same period, has been equally clear."

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