The tax-exempt market continued to strengthen Wednesday afternoon as traders said deals were very well received even as prices were bumped.

"It's stronger today by about two or three basis points," a New Jersey trader said. "There is interest in anything that shows yield and everyone is chasing yield. Since the market has backed up in the last week, some things are a tad cheaper, so there is a lot of interest in deals."

The trader noted smaller deals, such as the $19.8 million Maryland Health and Higher Educational Facilities Authority revenue bond deal for Goucher College was heavily oversubscribed. "There hasn't been all that much specialty paper with yield attached to it in the primary so that drives a lot of interest as well."

Outside the primary, the secondary is still quiet as focus remains on the primary. "There is mostly interdealer business in the secondary," the New Jersey trader said.

In the primary market, Citi priced $443.3 million of Chicago O'Hare International Airport passenger facility charge revenue refunding bonds in two series, rated A-minus by Standard & Poor's and A by Fitch Ratings. The first series consists of $113.7 million, and the second series of $329.6 million subject to the alternative minimum tax. Pricing details were not available by press time.

Indeed, the New Jersey trader said the credit was seeing interest. "It's subject to the alternative minimum tax and you haven't seen that in a while so that appeals to insurance companies and they can get blocks there they haven't been able to get in prior deals."

Another trader said he wasn't involved in the deal but the trader said a friend on the retail desk reported the issue was seeing decent demand and the combination of the higher yielding credit and that it's subject to the AMT produces yields not seen lately.

"There is not huge supply, but I like the 5s of 2022 at 3.22% as long as AMT isn't an issue," this trader tweeted.

JPMorgan priced $294.5 million of Arizona Health Facilities Authority hospital revenue refunding bonds, for the Phoenix Children's Hospital, rated BBB-plus by Standard & Poor's. Prices were not available by press time.

RBC Capital Market priced $250 million of Los Angeles County Metropolitan Transportation Authority proposition A first tier senior sales tax revenue refunding bonds, rated Aa2 by Moody's Investors Service and AAA by Standard & Poor's. Pricing information was not available by press time.

On Tuesday, the 10-year Municipal Market Data yield jumped three basis points to 1.90% while the 30-year yield rose one basis point to 3.02%. The two-year closed at 0.29% for the 19th straight session.

Treasuries were stronger. The benchmark 10-year yield and the 30-year yield dropped six basis points each to 1.75% and 2.85%, respectively. The two-year yield fell two basis points to 0.28%.

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