NEW YORK – The tax-exempt market continued to strengthen Wednesday afternoon as Treasuries firmed and the new issue market continued to be well received. Deals were upsized and pricings were moved up a day early to take advantage of strong demand.

“I’m not sure it’s much firmer, but it’s definitely feeling better,” a Los Angeles trader said. “We are getting more things done and customers have more interest today.”

He added that a few factors come into play on why munis are firming. “Govies are up on the long end and that’s helping and there is not a lot of supply which is also helping. So we are seeing offerings being lifted.”

Munis were firmer Wednesday afternoon, according to the Municipal Market Data scale. Yields inside five years were steady while six- and seven-year yields fell one basis point. Yields in the eight- to 10-year range dropped between one and three basis points. Yields in the 11- to 14-year range fell up to two basis points while yields outside 15 years fell between one and three basis points.

On Tuesday, the two-year yield closed flat at 0.31% for the 10th consecutive trading session while the 30-year ended flat at 3.25% for the seventh consecutive trading session. The 10-year yield finished at 1.87% for the fifth time.

Treasuries were stronger. The benchmark 10-year yield fell two basis points to 1.93% while the 30-year yield dropped three basis points to 3.12%. The two-year yield was steady at 0.27%.

In the primary market, Citi priced for institutions $506.1 million of Louisiana gasoline and fuels tax revenue refunding bonds, rated Aa1 by Moody’s Investors Service and AA-minus by Standard & Poor’s and Fitch Ratings. Pricing details were not yet available.

In retail pricing Tuesday, yields ranged from 0.46% with a 3% coupon in 2014 to 2.53% with 4% and 5% coupons in a split 2024 maturity. Credits maturing in 2013 were offered via sealed bid. Bonds maturing between 2025 and 2032 were not offered for retail. The bonds are callable at par in 2022.

Barclays Capital held preliminary pricing for $316.3 million of District of Columbia income tax-secured revenue refunding bonds, following a retail order period in the morning. The debt is rated Aa1 by Moody’s, AAA by Standard & Poor’s and AA-plus by Fitch.

Yields on the first series, $260.3 million of income tax secured revenue bonds, ranged from 0.33% with a 3% coupon in 2013 to 2.81% with a 5% coupon in 2027. Bonds maturing in 2012 were offered via sealed bid. The bonds are callable at par in 2022.

Bonds on the $56 million second series yielded 2.46% with a 5% coupon in 2025, 2.57% with a 5% coupon in 2026, and 2.66% with a 5% coupon in 2027. The bonds are callable at par in 2022.

JPMorgan priced for retail New York’ Metropolitan Transportation Authority revenue refunding bonds, rated A2 by Moody’s and A by Standard & Poor’s and Fitch. Prices were not available by press time.

In the competitive market, Seattle, Wash., auctioned $126.6 million of general obligation bonds in two pricings – a $76.7 million deal and $49.9 million – rated Aaa by Moody’s and AAA by Standard & Poor’s and Fitch.

JPMorgan won the bid for the $76.7 million deal. Prices were not available.

Morgan Stanley won the bid for the $49.9 million auction. Yields ranged from 0.28% with a 3% coupon in 2013 to 1.78% with a 5% coupon in 2021. Credits maturing in 2012 were not formally reoffered.

In the secondary market, trades reported by the Municipal Securities Rulemaking Board showed firming.

Bonds from an interdealer trade of Kentucky Economic Development Finance Authority 5s of 2042 yielded 4.18%, eight basis points lower than where they traded Tuesday.

A dealer sold to a customer Virginia Small Business Financing Authority 5.5s of 2042 at 5.04%, seven basis points lower than where they traded Tuesday.

A dealer bought from a customer Puerto Rico Electric Power Authority 5s of 2042 at 4.92%, seven basis points lower than where they traded Tuesday.

Bonds from an interdealer trade of University of Texas 5s of 2037 yielded 2.16%, three basis points lower than where they traded last Thursday.

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