The tax-exempt market picked up speed Thursday afternoon as traders got back to work after a quiet Wednesday.

Munis continued to firm as demand outweighed supply. "I'm seeing ridiculously high prints inside of 15 years because of the lack of source for bonds and customers aren't showing bonds out," a North Carolina trader said. "So if you want to be involved, you have to pay the number. Otherwise you'll stare at whatever credit is trading tighter from Wednesday and tremendously tighter from Tuesday."

This trader added that while next week's supply numbers aren't available yet, he does not think it will be enough to offset recent demand. "It's hard to imagine getting cheaper regardless of what Treasuries do," he said. "I can't imagine next week will be enough to fill inquiries people have inside of 20 years."

He added activity is up across the board. "There are a lot of dealer to dealer trades. There is a lot of going away business on larger blocks and smaller pieces from money managers. But, a lot of that activity is not necessarily being quoted in the street. Everything has a situation going on."

In the primary market, Bank of America Merrill Lynch priced for institutions $384.4 million of Port of Oakland, Calif., senior lien and refunding revenue bonds, rated A2 by Moody's Investors Service and A-plus by Standard & Poor's and Fitch Ratings.

Yields in the first series, $380.8 million of refunding revenue bonds subject to the alternative minimum tax, ranged from 0.58% with a 2% coupon in 2014 to 3.88% with a 3.75% coupon and 3.64% with a 5% coupon in a split 2033 maturity. The bonds are callable at par in 2022.

Bonds in the second series, $3.6 million of refunding revenue bonds, yielded 0.42% with a 2% coupon in 2014.

PNC Capital Markets priced for institutions $169 million of Allegheny County, Pa., general obligation bonds, rated A1 by Moody's and A-plus by Standard & Poor's. The first series consists of $115 million of GO debt followed by $54 million of refunding bonds. Prices were not yet available.

In the competitive market, Massachusetts auctioned $1.2 billion of short-term notes in two pricings of $600 million each. The notes are rated MIG-1 by Moody's, SP-1-plus by Standard & Poor's, and F1-plus by Fitch.

The first pricing of $600 million was bought by three firms. Morgan Stanley won the bid for $450 million, JPMorgan won the bid for $100 million, and Jefferies won the bid for $50 million. Each series had a 2% coupon maturing in 2013 and prices were not formally re-offered.

The second pricing of $600 million was bought by five firms. Citi won the bid for three series of $50 million each and Jefferies won the bid for two series of $50 million each. JPMorgan bought one series of $200 million, Fidelity won $50 million, and Wells Fargo Securities bought one series of $100 million. Each series had a 2% coupon maturing in 2013. Notes were not formally re-offered.

On Wednesday, the 10-year and 30-year Municipal Market Data yields fell four basis points each to 1.73% and 2.90%, respectively. The two-year was steady at 0.30%.

Treasuries continued to weaken Thursday afternoon. The benchmark 10-year yield rose three basis points to 1.65% while the 30-year yield jumped four basis points to 2.83%. The two-year was steady at 0.26%.


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