NEW YORK – The tax-exempt market was relatively slow for a second day as traders waited for the new issue market to provide impetus for movement. Excluding primary deals, the market was been quiet so far this week.

Munis are flat and slow, according to a New York trader.

And according to the Municipal Market Data scale, munis were steady in Tuesday morning trading. On Monday, the two-year yield closed steady at 0.33% for the sixth consecutive trading session. The 10-year yield fell two basis points to 1.95% while the 30-year yield dropped one basis point to 3.31%.

Treasuries were slightly weaker. The benchmark 10-year yield and the 30-year yield each rose two basis points to 2.00% and 3.14%. The two-year was steady at 0.27%.

In the primary market, Pennsylvania is expected to auction the largest deal of the week – $950 million of GOs in the competitive market. The credit is rated Aa1 by Moody’s Investors Service, AA by Standard & Poor’s, and AA-plus by Fitch Ratings.

In the negotiated sector, Wells Fargo is expected to price for institutions $556 million of New York Metropolitan Transportation Authority revenue bonds, following a retail order period Monday. The credit is rated A2 by Moody’s and A by Standard & Poor’s and Fitch.

In retail pricing, yields ranged from 0.65% with a 3% coupon in 2013 to 4.36% with a 4.25% coupon in 2042. Bonds maturing in 2012 were offered via sealed bid. Credits maturing between 2024 and 2026, in 2028, 2029, 2032, 2041 and 2047 were not offered for retail. The bonds are callable at par in 2022.

Bank of America Merrill Lynch is expected to price for institutions $491.8 million of Atlanta airport general revenue bonds, following a retail order period Monday. The credit is rated A1 by Moody’s and A-plus by Standard & Poor’s and Fitch.

In retail pricing yields on the first series, $65.3 million of airport general revenue bonds not subject to the alternative minimum tax, ranged from 0.35% with a 2% coupon in 2013 to 4.05% with a 4% coupon in 2037. Bonds maturing in 2042 were not offered for retail. The bonds are callable at par in 2022.

Yields on the second series, $191.2 million of airport general revenue bonds not subject to the alternative minimum tax, ranged from 0.35% with a 3% coupon in 2013 to 2.72% with a 5% coupon in 2022. Credits maturing in 2016, 2018, 2020, and between 2023 and 2042 were not offered for retail. The bonds are callable at par in 2022.

Yields on the third series, $235.3 million of airport general revenue bonds subject to the alternative minimum tax, ranged from 0.60% with a 4% coupon in 2013 to 3.27% with a 5% coupon in 2022. Credits maturing between 2023 and 2042 were not offered for retail. The bonds are callable at par in 2022.

Back in the competitive market, the Virginia College Building Authority is expected to auction $320.7 million of revenue bonds, rated Aa1 by Moody’s and AA-plus by Fitch.

In economic news, housing starts fell 5.8% to 654,000 in March from a downwardly revised 694,000 in February. It was the second consecutive drop in housing starts, making the March total the lowest since last October.

The 654,000 figure was well below the 705,000 economists had predicted, but was 10.3% above the March 2011 rate.

“The decline in housing starts in March was driven by the volatile multi-family sector,” wrote economists at RDQ Economics. “Looking through the volatility, housing starts rose 10.5% at an annual rate in the first quarter with single-family starts 10.1% in the quarter and multi-family starts up 11.6%.”

“Although the slight further decline in single-family starts in March following February’s 9.0% drop is disappointing, the leading indicators within this report are encouraging,” they added. “We do not expect housing construction to be a big part of the growth story in 2012, but the leading indicators within this report suggest that housing starts will rise further in the second quarter following the gains seen in the last three consecutive quarters.”

In other economic news, industrial production was unchanged in March while capacity use fell to 78.6% from 78.7% in February.

The production reading fell below analyst expectations who had predicted a rise of 0.3%. Capacity came in at the 78.6% economists had expected.

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