NEW YORK – The tax-exempt market was slightly weaker Thursday morning, following Wednesday’s declines, as dealers turned their attention to selling the remainder of this week’s deals in the primary market.

“Munis are weaker,” a New York trader said. “There is lots of concentration on new issues. Dealers are trying to sell those so there is less focus on the secondary.”

Munis were weaker Thursday morning, according to the Municipal Market Data scale. Yields inside six years were steady while yield outside seven years rose one to two basis points.

On Wednesday, the two-year yield closed steady at 0.33%. The 10-year yield jumped three basis points to 1.97% while the 30-year yield increased two basis points to 3.34%.

Treasuries were slightly weaker. The benchmark 10-year yield and the 30-year yield each rose one basis point to 2.04% and 3.20%. The two-year was steady at 0.29%.

In the primary market, Morgan Stanley is expected to price for institutions the largest deal of the week, $1.3 billion of California various purpose general obligation bonds, rated A1 by Moody’s Investors Service and A-minus by Standard & Poor’s.

In the two-day retail order period, yields on the first series, $890 million of new money for infrastructure projects, ranged from 0.68% with a 3% coupon in 2014 to 4.45% with a 4.375% coupon in 2042. Credits maturing in 2035 and portions of 2042 were not offered for retail. The bonds are callable at par in 2022.

Yields on the second series, $410.2 million of refunding bonds, ranged from 0.68% with 3% and 4% coupons in a split 2014 maturity to 3.17% with a 5% coupon in 2024. Portions of credits maturing in between 2014 and 2022 were not offered for retail. The bonds are callable at par in 2022.

In the competitive market, South Carolina is expected to auction $144.1 million of general obligation bonds in two pricings, following a $76.8 million pricing Wednesday. The credit is rated Aaa by Moody’s and Fitch and AA-plus by Standard & Poor’s.

In economic news, the U.S. international trade deficit was $46 billion in February, down 12.4% from the $52.5 billion deficit in January. The February deficit was less than the $52 billion that economists had predicted. The February figure resulted from $181.2 billion of exports and $227.2 billion of imports.

“The widening of the January trade gap precipitated a spate of significant downward revisions to first-quarter GDP with a number of forecasters lowering their estimates into the 1.5% area,” wrote economists at RDQ Economics. “Our belief was that such a large slowdown was unlikely and we have held our estimate at around 2.5%. The February trade data cancels out the January widening and trade is now on track to be neutral to a small add to first-quarter growth.”

In other economic news, seasonally adjusted initial jobless claims rose 13,000 to 380,000 for the week ending April 7. The initial claims were higher than the 355,000 expected by economists.

Continuing claims fell 98,000 to 3.251 million for the week ending March 31, the lowest since July 19, 2008. Continuing claims were lower than the 3.340 million economists had predicted.

“The rise in initial jobless claims in the first week of April is the first data point from the labor market to provide some support to the slowing in March payroll growth and, for that reason, these data will likely garner significant attention,” RDQ economists wrote. “However, we would caution that this is for a holiday week and one that is particularly difficult to seasonally adjust because of its moveable nature. We would also point out that the claims data are highly volatile and we cannot read too much into any one week’s data. Our projection is that claims will fall back next week and we think the report will attract more than the usual market interest.”

In other economic news, the producer price index was unchanged in March, falling short of the 0.3% increased expected by economists. Core producer prices, excluding food and energy, increased 0.3%, beating the 0.2% that economists had predicted.

“A fall in energy prices was the major factor restraining the headline PPI, while core finished goods prices continued to rise at a fairly brisk pace,” RDQ economists wrote. “In short, we see no evidence of a retreat in inflation here but neither is there evidence of a pickup.”

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