The municipal bond market continued to strengthen Wednesday afternoon as buyers flocked to the primary market, pushing munis higher.

A Los Angeles trader said he was involved in the $300 million California Department of Water Resources deal and the almost $1 billion Bay Area Toll Authority issue. He said both deals are seeing huge demand allowing underwriters to increase deal sizes and accelerate pricing periods.

"Especially on the taxable side, we are seeing interest," he said, adding due to demand underwriters bumped the Bay Area Toll Authority deal in size so it was a lot bigger than expected.

"The taxable side is interesting because yields have gone up a lot," the Los Angeles trader added. "Spreads are dropping but yields themselves are actually rising. Issuers are paying more now than they were a few weeks ago."

Most of the demand is coming from cash on the sidelines, he said. "It seems like momentum. It's hard to hold that cash. We are a few basis points stronger."

In the primary market Wednesday, Morgan Stanley priced for retail and institutions $1.28 billion of New York's Metropolitan Transportation Authority transportation revenue refunding bonds, rated A2 by Moody's Investors Service and A by Standard & Poor's and Fitch Ratings. Institutional pricing was originally expected Thursday.

Yields ranged from 0.28% with 2% and 4% coupons in a split 2013 maturity to 3.44% with a 4% coupon and 3.29% with a 5% coupon in a split 2030 maturity. Credits maturing in 2012 were offered via sealed bid. The bonds are callable at par in 2022. Yields were lowered as much as five basis points from retail pricing.

Bank of America Merrill Lynch priced for institutions $903.2 million of California's Bay Area Toll Authority San Francisco Bay Area toll Bridge revenue bonds, rated Aa3 by Moody's, AA by Standard & Poor's, and AA-minus by Fitch. A second retail order period was expected Wednesday but institutional pricing was moved up a day to take advantage of demand. The deal was also bumped up from the expected $716 million.

Yields ranged from 0.88% with 2% and 5% coupons in a split 2017 maturity to 3.20% with a 4% coupon and 2.88% with a 5% coupon in a split 2031 maturity. The bonds are callable at par in 2022. Yields were lowered seven and eight basis points on the short end from retail pricing.

Citi priced $645 million of Broward County, Fla., Airport System revenue refunding bonds, rated A1 by Moody's, A-plus by Standard & Poor's, and A by Fitch. Pricing details were not available by press time.

Siebert Brandford Shank & Co. held a second retail order period for $570 million of Connecticut general obligation and GO refunding bonds, rated Aa3 by Moody's and AA by Standard & Poor's, Fitch, and Kroll Bond Rating Agency. Institutional pricing is expected Thursday.  Prices details were not yet available.

In the initial retail order period Tuesday, the first series, $175 million of GO SIFMA index bonds, were not offered.

Yields on the second series, $325 million of GOs, ranged from 1.79% with 2%, 3%, and 4% coupons in a split 2020 maturity to 3.15% with 3.125% and 4% coupons in a split 2032 maturity. Portions of bonds maturing between 2024 and 2032 were not offered for retail. The bonds are callable at par in 2022.

Bonds in the third series, $70 million of GO refunding bonds, yielded 0.36% with 3% and 4% coupons in 2014 and 0.48% with a 4% coupon in 2015. Bonds maturing in 2013 were offered via sealed bid.

On Tuesday, the 10-year Municipal Market Data yield and the 30-year yield each fell three basis points to 1.90% and 3.03%, respectively. The two-year closed at 0.29% for the 38th consecutive session.

Treasuries were stronger Wednesday afternoon. The benchmark 10-year yield and the 30-year yield dropped two basis points each to 1.79% and 2.98%, respectively. The two-year was steady at 0.26%.

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