NEW YORK – The tax-exempt market was looking for direction from the primary market, but traders noted there wasn’t enough excitement to boost activity.

“Munis have been asleep the last two days,” a Chicago trader said. “It’s a typical environment. When yields get lower and lower buyers take a break and see what new issues are doing. Then when they are allocated new issues, they put some bonds to work in the secondary on Thursday. Then go home for the weekend. It’s the same case every week.”

The muni yield curve continued to steepen with yields on short end falling and yields on long end rising, according to the Municipal Market Data scale. Yields inside 10 years were steady to one basis point higher while yields outside 11 years were steady to two basis points lower.

On Monday, the 10-year yield fell two basis points to 1.73% – just six basis points above its record low of 1.67% set Jan. 18. The 30-year yield dropped three basis points to 3.05% – setting a record low as recorded by MMD. It beat the previous record low of 3.08% set Wednesday. The two-year yield remained steady at 0.31% for the 19th consecutive trading session.

Treasuries were mostly flat. The benchmark 10-year yield and the 30-year yield were steady at 1.79% and 2.95%. The two-year yield rose one basis point to 0.28%.

In the primary market, Morgan Stanley repriced for institutions $503.8 million of New York State Environmental Facilities Corp. state clean water and drinking water bonds for the New York City Municipal Water Finance Authority, following a retail order period Monday. The bonds are rated Aaa by Moody’s Investors Service, AAA by Standard & Poor’s, and AA-plus by Fitch Ratings.

Yields ranged from 0.29% with a 2% coupon in 2014 to 3% priced at par in 2029. Credits maturing in 2013 were offered via sealed bid. The bonds are callable at par in 2022. Yields were lowered as much as four basis points on maturities inside 2024, but raised as much as three basis points on maturities outside 2025.

Bank of America Merrill Lynch priced $177 million of Connecticut Housing Finance Authority housing mortgage finance program bonds, rated triple-A.

Yields on the first series, $106.8 million, ranged from 2.90% priced at par in 2024 to 3.875% priced at par in 2038. The bonds are callable at par in 2021.

Yields on the second series, $70.2 million subject to the alternative minimum tax, ranged from 2% priced at par in 2017 to 3.50% priced at par in 2024. The bonds are callable at par in 2021.

In competitive deals, Citi won the bid for $246.5 million of Seattle, Wash., revenue bonds. Pricing details were not available by press time.

In the secondary market, trades reported by the Municipal Securities Rulemaking Board were mostly firmer.

Bonds from an interdealer trade of Illinois 5s of 2027 yielded 3.23%, 50 basis points lower than where they traded last Thursday.

Bonds from an interdealer trade of North Texas Tollway Authority 8.91s of 2030 yielded 6.40%, 22 basis points lower than where they traded Friday.

A dealer sold to a customer County of Wayne, Mich., 3s of 2013 at 2.30%, 12 basis points lower than where they traded Monday.

A dealer bought from a customer Illinois taxable 4.421s of 2015 at 2.28%, six basis points lower than where they traded Monday.

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