NEW YORK – The tax-exempt market continued to strengthen Tuesday afternoon as limited supply appeared to push demand higher. Traders said deals in the primary market were seeing strong demand.

“I’m looking at a lot of new issues and there is still plenty of demand out there,” a Dallas trader said. “If the right bond and the right yield come along, it’s a dog fight. That tells me right there we are in solid shape because people smarter than me are trying to buy the same bonds.”

He added several deals he looked at Tuesday were priced stronger from premarketing levels on Monday, including one deal that saw yields lowered by three basis points.

“The Sentara Health deal showed good demand and that has been strong today,” he said, referring to the $160 million Norfolk City, Va., Sentara Health deal priced by Citi.

Indeed, munis were steady to stronger early Tuesday afternoon, according to the Municipal Market Data scale. Yields inside three years were steady while the four- to six-year yields fell as much as two basis points. Outside seven years, yields dropped between two and four basis points.

On Monday, the two-year yield closed flat at 0.31% for the 14th consecutive trading session. The 10-year yield and the 30-year yield each fell two basis points to 1.80% and 3.13%.

The 10-year hasn’t hit 1.80% since Feb. 6 when it yielded 1.79%. The 30-year beat its previous record low of 3.14% last hit on Feb. 2 and originally set Jan. 31.

Treasuries were stronger Tuesday afternoon. The benchmark 10-year yield and the 30-year yield each fell four basis points to 1.84% and 3.03%. The two-year was steady at 0.27%.

In the primary market, Siebert Brandford Shank & Co. priced $400 million of Chicago second-lien water revenue bonds. The bonds are rated Aa3 by Moody’s Investors Service, AA-minus by Standard & Poor’s and AA by Fitch Ratings. Prices were not yet available.

Citi priced $160 million of Norfolk City, Va., Economic Development Authority revenue and refunding bonds, rated Aa2 by Moody’s and AA by Standard & Poor’s. Pricing information was not available by press time.

In the competitive market, JPMorgan won the bid for $419.3 million of Massachusetts Commonwealth Transportation Fund revenue bonds for the Accelerated Bridge Program, rated triple-A.

Yields ranged from 0.48% with a 5% coupon in 2015 to 3.70% with a 4% coupon in 2041. Credits maturing in 2013 and 2014 were not formally reoffered. The bonds are callable at par in 2021.

Cedar Rapids, Iowa, auctioned a total of $107.1 million of general obligation and revenue bonds divided into six series, including $5.83 million, $11.64 million, 11.81 million, $59.57 million, $2.92 million, and $15.33 million.

Robert W. Baird won the bid for $5.83 million, $11.81 million, $59.57 million, and $2.92 million. Piper Jaffray won the bid for $11.64 million and $15.33 million. Prices were not yet available.

Wells Fargo Securities won the bid for $92.9 million of Knoxville, Tenn., GOs, rated Aa1 by Moody’s, AA-plus by Standard & Poor’s, and AAA by Fitch.

Yields ranged from 0.20% with a 1% coupon in 2013 to 2.50% with a 3% coupon in 2025. Credits maturing in 2014 and 2015 were not formally reoffered. The bonds are callable at par in 2021.

In the secondary market, trades reported by the Municipal Securities Rulemaking Board showed firming on the long end.

Bonds from an interdealer trade of Orange County, Fla., Health Facilities Authority 5s of 2042 yielded 4.29%, six basis points lower than where they traded Monday.

Bonds from an interdealer trade of California 5s of 2042 yielded 3.99%, four basis points lower than where they traded Monday.

Bonds from another interdealer trade of Puerto Rico public improvement 5s of 2041 yielded 4.86%, four basis points lower than where they traded Monday.

A dealer bought from a customer New Jersey Tobacco Settlement Financing Corp. 5s of 2041 at 6.64%, two basis points lower than where they traded Monday.

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