The tax-exempt market was weaker, following Treasuries, as many deals in the primary market started to price. Still, traders said the tone of the market was constructive and not a lot of balances were left on deals.

“Treasury markets are seeing a correction here and so the Municipal Market Data scale is seeing cuts between two and four basis points,” a Los Angeles trader said. “I would say the market tone is pretty good and constructive. There are deals in the market that are being done and we are seeing flows.”

He added traders are adjusting slightly to the cuts but volume is decent given it’s an August vacation week. “There are not a lot of balances on deals and the overall market is constructive.”

The trader said muni yields are following Treasury yields higher but that if you have the right bond a customer is looking for, you should be unaffected by Treasuries.

Munis continued to weaken Tuesday afternoon, according to the MMD scale. Yields inside five years were flat while yields outside six years jumped as much as four basis points.

On Monday, the 10-year yield finished at 1.71% for the second session, 11 basis points above its record low of 1.60% set July 26. The 30-year yield closed at 2.87% for the second session, eight basis points off its record low yield of 2.79% set July 25. The two-year was steady at 0.29% for the eighth consecutive session.

Treasuries were much weaker. The benchmark 10-year yield jumped seven basis points to 1.63% while the 30-year yield spiked up eight basis points to 2.73%. The two-year yield increased one basis point to 0.26%.

In the primary market, Bank of America Merrill Lynch priced its second day of retail of $850 million of New York City Transitional Finance Authority future tax-secured bonds and subordinate bonds, rated Aa1 by Moody's Investors Service and AAA by Standard & Poor's and Fitch Ratings.

Yields on the first series, $100 million of subordinate bonds, ranged from 0.53% with 2% and 4% coupons in a split 2015 maturity to 2.49% with a 2.5% coupon in 2026. Credits maturing in 2014 were offered via sealed bid. The bonds are callable at par in 2022. Yields were increased between three and five basis points from the first day of retail pricing Monday.

Yields on the second series, $750 million of future tax-secured subordinate bonds, ranged from 0.58% with a 5% coupon in 2015 to 3% priced at par and 2.86% with a 5% coupon in a split 2032 maturity. Bonds maturing in 2013 and 2014 were offered via sealed bid. Credits maturing between 2024 and 2027 and between 2029 and 2031 were not offered for retail. The bonds are callable at par in 2022. Yields were increased between three and five basis points from the first retail order period Monday.

In the competitive market, Washington auctioned $788.7 million of general obligation and refunding bonds in three pricings, rated Aa1 by Moody’s and AA-plus by Standard & Poor’s and Fitch.

Bank of America Merrill Lynch won the bid for $364.6 million of motor vehicle fuel tax general obligation refunding bonds. Yields ranged from 0.20% and 0.22% with 3% coupons in a split 2013 maturity to 3.25% with a 3.125% coupon in 2030. The bonds are callable at par in 2022.

Citi won the bid for $338.7 million and US Bancorp Investments won the bid for $85.4 million. Prices were not available by press time.

Minnesota issued $658.5 million of GO bonds in three pricings, rated Aa1 by Moody’s and AA-plus by Standard & Poor’s.

Wells Fargo Securities won the bid for $234 million of GO-backed trunk highway bonds. Yields ranged from 0.45% with a 5% coupon in 2015 to 3.08% with a 3% coupon in 2032. Credits maturing in 2013 and 2014 were offered via sealed bid. The bonds are callable at par in 2022.

JPMorgan won the bid for $422 million of GO-backed various-purpose bonds. Piper Jaffray won the bid for $2.5 million of taxable GO state bonds. Prices were not available by press time.

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