The tax-exempt market saw buyers for a second straight trading session as stronger long-term Treasuries pulled muni prices higher.

One institutional trader said the market was stronger Wednesday morning. "There are buyers out there," he said.

In the primary market Wednesday, Morgan Stanley is expected to price for retail $1 billion of New York's Metropolitan Transportation Authority transportation revenue refunding bonds, rated A2 by Moody's Investors Service and A by Standard & Poor's and Fitch Ratings. Institutional pricing is expected Thursday.

Bank of America Merrill Lynch is expected to hold a second day of the retail order period on $716 million of California's Bay Area Toll Authority revenue bonds, rated Aa3 by Moody's, AA by Standard & Poor's, and AA-minus by Fitch. Institutional pricing is expected Thursday.

Citi is expected to price $645 million of Broward County, Fla., Airport System revenue refunding bonds, rated A1 by Moody's, A-plus by Standard & Poor's, and A by Fitch.

Siebert Brandford Shank & Co. is expected to hold a second retail order period for $570 million of Connecticut general obligation and GO refunding bonds, rated Aa3 by Moody's and AA by Standard & Poor's, Fitch, and Kroll Bond Rating Agency. Institutional pricing is expected Thursday.

In the initial retail order period Tuesday, the first series, $175 million of GO SIFMA index bonds, were not offered.

Yields on the second series, $325 million of GOs, ranged from 1.79% with 2%, 3%, and 4% coupons in a split 2020 maturity to 3.15% with 3.125% and 4% coupons in a split 2032 maturity. Portions of bonds maturing between 2024 and 2032 were not offered for retail. The bonds are callable at par in 2022.

Bonds in the third series, $70 million of GO refunding bonds, yielded 0.36% with 3% and 4% coupons in 2014 and 0.48% with a 4% coupon in 2015. Bonds maturing in 2013 were offered via sealed bid.

On Tuesday, the 10-year Municipal Market Data yield and the 30-year yield each fell three basis points to 1.90% and 3.03%, respectively. The two-year closed at 0.29% for the 38th consecutive session.

The Treasury yield curve flattened Wednesday morning. The two-year yield rose one basis point to 0.27%. The benchmark 10-year yield and the 30-year yield dropped three basis points each to 1.78% and 2.97%, respectively.

In economic news, housing starts rose 2.3% in August to a seasonally adjusted rate of 750,000 while building permits fell 1.0% to a seasonally adjusted annual rate of 803,000.

The August housing starts came in below the 765,000 expected by economists. Building permits came in slightly above the 800,000 projected.

"This is another report that provides support for the view that the housing market is improving," wrote economists at RDQ Economics. "Both housing starts and building permits have risen at a double-digit pace both over the last three months and over the last year. Further confirming the upward trend in activity are the last four monthly readings on the level of building permits, which show them above the level of housing starts. This differential points to a backlog of starts and suggests that housing starts will advance further in the fall."

In other economic news, existing home sales rose 7.8% in August to a 4.82 million-unit rate. The figure beat analyst expectations of 4.56 million sales in August.

"This report provides further evidence that the housing market has bottomed and is now improving," RDQ economists wrote. "Most significant to us is the continued gain in home prices, which creates a positive dynamic in the housing market as the number of households with negative equity diminishes lessening the incentives for strategic default, while the prospect of rising prices also brings in new buyers."

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