NEW YORK – The tax-exempt market was mostly steady in Wednesday afternoon trading as reaction to the Federal Open Markets Committee statement was muted in the Treasury market and failed to provide direction for municipal bonds.

“Overall, I would say we are fairly flat,” a Chicago trader said. “You can find trades that are much stronger and find trades that are off. But I wouldn’t say we are any one direction.”

He added there is still not a lot of underlying supply but the market is looking toward an Illinois deal coming next week. “But the stuff that is high grade and high quality hasn’t moved at all. If you need to move something, you cut it and find a price.”

He added theret was some decent follow through even for 3% coupons further out on the curve Wednesday afternoon.

The trader said in terms of munis following Treasuries, if the 10-year Treasury gets behind 2.00%, the bonds can fade further. “But when it’s through 2.00%, it’s totally different and hard for munis to drift off.”

Munis were steady to slightly weaker Wednesday early afternoon, according to the Municipal Market Data scale. Yields outside three years rose up to two basis points.

On Tuesday, the two-year yield closed steady at 0.31% for the fifth consecutive trading session. The 10-year yield and the 30-year yield each closed steady at 1.85% and 3.25%.

Treasuries continued to weaken. The benchmark 10-year yield rose three basis points to 2.00% while the 30-year yield jumped four basis points to 3.16%. The two-year was steady at 0.28%.

Treasuries did not react to the Federal Open Market Committee statement released Wednesday afternoon. The FOMC maintained its 0% to 0.25% target range for the federal funds rate.

“The April policy statement was very similar to the statement released in March and the policy paragraphs were entirely unchanged,” wrote economists at RDQ Economics. “The language on the economy included a modest upgrade to the outlook as although the Fed repeated that growth is expected to be ‘moderate’ in the coming quarters, today’s statement added that the Committee expects growth will then ‘pick up gradually’.”

“The Fed also acknowledged ‘some signs of improvement’ in the housing market,” the economists continued. “The pickup in inflation that the Fed expected in March is acknowledged to have materialized with this statement, but the Fed again asserts that this is a temporary consequence of higher energy prices. As with the March statement, this statement neither takes a step toward nor backs away from QE3, which we think will be the tone that Fed Chairman Bernanke will take in his press conference later this afternoon.”

In the primary market, Morgan Stanley priced for retail $268.5 million of Allen County, Ohio, hospital facilities revenue refunding and improvement bonds, rated A1 by Moody’s Investors Service and AA-minus by Standard & Poor’s and Fitch Ratings. Pricing information was not available by press time.

Citi priced $120 million of Indiana Finance Authority revenue and refunding bonds, rated Aa1 by Moody’s and AA-plus by Standard & Poor’s and Fitch. Details were not available.

In the competitive market, Citi won the bid for $262.3 million of Florida Department of Transportation bonds. Prices were not yet available.

Bank of America Merrill Lynch won the bid for $207.1 million of Nassau County general obligation bonds, rated A1 by Moody’s and A-plus by Standard & Poor’s. Prices were not yet available.

Bank of America Merrill Lynch won the bid for $110.2 million of Colorado Springs revenue bonds, rated Aa2 by Moody’s and AA by Standard & Poor’s and Fitch.

Yields ranged from 0.28% with a 3% coupon in 2013 to 3.53% with a 4% coupon in 2033. Credits maturing between 2015 and 2018, between 2025 and 2026, and between 2034 and 2043 were sold but not available. The bonds are callable at par in 2022.

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

A dealer bought from a customer Illinois 5s of 2035 at 4.34%, seven basis points lower than where they traded two weeks ago.

A dealer sold to a customer Michigan Finance Authority 5s of 2031 at 3.13%, five basis points lower than where they traded last week.

A dealer bought from a customer Puerto Rico Electric Power Authority 5s of 2042 at 5.00%, two basis points lower than where they traded Monday.

A dealer bought from a customer New York City Transitional Finance Authority 5s of 2042 at 3.64%, two basis points lower than where they traded last week.

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