The tax-exempt market traded slightly weaker Wednesday as new issue supply flooded the market, though traders were hesitant to call it a sell-off.

"The market struggles, but the wind picks up and it moves ahead quickly," a Chicago trader said. "So we are struggling to get back, but we will catch a little wind because the macro winds are pro bonds. The economy is not in good shape so the macro picture is not higher interest rates."

He added that the muni market is driven by supply and demand. "There is not a lot of supply," he said. "And Treasuries are better today."

"If you have something that's a little different and off the beaten path with some extra spread, you can sell and trade it. There are customers looking for income, capital preservation and it doesn't necessarily need to be the gold standard that a high-grade bond offers."

In the primary market, Barclays priced $435 million of New York City Municipal Water Finance Authority water and sewer second general resolution revenue bonds following a retail order period Tuesday. The bonds are rated Aa2 by Moody's Investors Service and AA-plus by Standard & Poor's.

The bonds yielded 3.855% with a 3.75% coupon, 3.75% with a 4% coupon, and 3.50% with a 5% coupon in a split 2047 maturity. Yields were increased 10 basis points from retail pricing Tuesday.

Bank of America Merrill Lynch priced $149.5 million of Georgia Housing and Finance Authority single family mortgage bonds, rated AAA by Standard & Poor's.

The bonds were priced at par to yield from 0.20% in 2013 to 3.90% in 2043. The bonds are callable at par in 2022.

Bank of America Merrill Lynch is expected to price for institutions $115 million of triple-A rated Delaware general obligation refunding bonds following a retail order period Tuesday. Details were not available by press time.

In retail pricing, yields ranged from 0.66% with 3% and 4% coupons in a split 2017 maturity to 2.42% with a 3% coupon in 2026. The bonds are callable at par in 2023.

In the competitive market, triple-A rated North Carolina auctioned $692.3 million of GOs in two pricings.

Bank of America Merrill Lynch won the bid for $347.7 million of refunding bonds. Yields ranged from 0.34% with a 3.5% coupon in 2015 to 2.34% with a 5% coupon in 2026.

US Bank won the bid for $344.6 million. Pricing details were not yet available.

"They sold most of the deal," a New York trader said. "But it came in cheap. Really cheap." Indeed, bonds bought by B of A Merrill with a 5% coupon maturing in 2024 yielded 17 basis points above the MMD scale while bonds maturing in 2025 with a 5% coupon yielded 20 basis points above the MMD scale. Credits maturing in 2026 with a 5% coupon yielded 23 basis points above the comparable MMD yield.

Wells Fargo Securities won the bid for $490 million of Santa Clara County, Calif., GOs, rated AA-plus by Standard & Poor's and Fitch Ratings. Pricing details were not available by press time.

On Tuesday, municipal bond market scales finished steady to stronger.

Yields on the Municipal Market Data triple-A GO scale ended flat to two basis points lower. The 10-year yield and the 30-year yield finished steady at 1.85% and 2.92%, respectively. The two-year yield fell one basis point to 0.31% after trading steady at 0.32% for five sessions.

The Municipal Market Advisors 5% coupon triple-A benchmark scale ended steady for the second session. The 10-year yield closed flat at 1.87% for the fourth session while the 30-year yield also closed flat for the fourth session at 2.99%. The two-year closed unchanged at 0.35% for the 16th session.

Treasuries continued to trade mostly steady. The two-year and 30-year yields were flat at 0.28% and 3.21%, respectively. The benchmark 10-year yield fell one basis point to 2.02%.

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