The tax-exempt market paused Tuesday afternoon as traders all waited in limbo ahead of Wednesday's Federal Open Market Committee announcement.

Even with light activity, the market felt a touch weaker as dealers lightened their load as much as possible ahead of the announcement.

"The muni market is weird today," a Chicago trader said. "It feels a little weaker but there are not a lot of offerings that are in the right realm. Customers are involved but it's very selective. Everyone is waiting for the Fed. Dealers don't want to take any risk and are going into tomorrow as light as possible."

In the primary Tuesday, Citi held preliminary pricing for $347.2 million of New York City Municipal Water Finance Authority water and sewer system second general resolution revenue bonds. The bonds are rated Aa2 by Moody's Investors Service and AA-plus by Standard & Poor's and Fitch Ratings.

Yields ranged from 3.38% with a 5% coupon in 2028 to 4.40% with a 4.25% coupon and 4.25% with a 5% coupon in a split 2047 maturity. The bonds are callable at par in 2023. Yields on the 2028 maturity were lowered four basis points from retail pricing and yields on the 2035 maturity were lowered one basis point. Yields on the 2047 maturity with a 5% coupon were raised seven basis points from retail pricing.

In the competitive market, Wells Fargo won the bid for $157.6 million of New Mexico severance tax bonds, rated Aa1 by Moody's and AA by Standard & Poor's.

Yields ranged from 0.19% with a 5% coupon in 2014 to 2.15% with a 4% coupon in 2023. The bonds are callable at par in 2018.

Monday, yields on the Municipal Market Data scale ended flat. The 10-year and 30-year yields were flat at 2.23% and 3.50%, respectively. The two-year was steady at 0.31% for the fourth session.

Muni yields on the Municipal Market Advisors 5% scale closed mostly flat. The 10-year and 30-year yields were steady at 2.33% and 3.62%, respectively. The two-year was flat at 0.38% for the second session.

Treasuries were choppy Tuesday and pared most losses by the afternoon session. The two-year yield increased one basis point to 0.28% while the 30-year yield slid two basis points to 3.34%. The benchmark 10-year was steady at 2.18%.

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