The tax-exempt market turned its attention to the larger New Jersey deals pricing Tuesday.
Traders said the secondary market took a backseat as several deals priced aggressively in the primary.
"I am hearing New Jersey is getting good reception," a New Jersey trader said, referring to the New Jersey Transportation Trust Fund Authority deal. "It looks aggressive but it seems like it is getting interest. People are selective but then the new issues draw them out."
He said the secondary was trading sideways as primary activity took the attention. "The secondary is bumped in price because things are priced aggressively in the primary. But the secondary is being ignored."
Goldman, Sachs & Co. is expected to price for institutions $875 million of New Jersey Transportation Trust Fund Authority transportation system bonds. About $540 million is tax-exempt and $335 million is taxable. The bonds are rated A1 by Moody's Investors Service and A-plus by Standard & Poor's and Fitch Ratings.
Citi is expected to price $690 million of New Jersey Turnpike Authority turnpike revenue SIFMA floating rate notes, rated A3 by Moody's, A-plus by Standard & Poor's, and A by Fitch.
Municipal bond scales ended stronger Monday after a stronger session Friday.
Yields on the Municipal Market Data triple-A GO scale were as much as two basis points lower. The 30-year yield fell two basis points to 2.92%. The 10-year yield finished flat at 1.72% for the second session and the two-year closed steady at 0.29% for the seventh session.
Yields on the Municipal Market Advisors 5% coupon triple-A benchmark scale ended as much as one basis point lower. The 10-year yield fell one basis point to 1.78%. The 30-year was flat at 3.05% for the second session and the two-year was flat at 0.32% for the seventh session.
Treasuries were weaker Tuesday morning. The benchmark 10-year yield jumped three basis points to 1.72% and the 30-year yield increased two basis points to 2.90%. The two-year yield increased one basis point to 0.23%.
In economic news, the March consumer price index fell 0.2% while the core rate, which excludes food and energy, advanced 0.1%. Both numbers came in short of economists' expectations.
"Through the monthly volatility, the short-run inflation trends have been stable of late as both headline and core CPI inflation rates have run at 2.1% over the last three months," wrote economists at RDQ Economics. "With the Fed setting an inflation threshold at 2.5% on the one- to two-year outlook for overall PCE price inflation, which tends to run slightly below CPI inflation, there is simply nothing here that will concern the majority on the FOMC."
In other economic news, housing starts soared 7.0% in March to 1.036 million while permits fell 3.9% to 902,000. March starts came in above the 930,000 estimated by economists but permits fell short of the 940,000 expected.
"Although the housing starts data were much stronger than expected and residential investment looks set to contribute to growth in both the first and second quarters of the year, the underlying details were nowhere near as strong as the headlines," RDQ economists wrote. "We expect starts to run at close to the one million level through 2013 but we expect the mix to shift towards single-family starts and look for a bit of a pullback in starts over the next couple of months."
In additional economic news, industrial production rose 0.4% in March while capacity use ticked up to 78.5%. The gain was higher than the 0.2% increase expected and capacity also came in above the 78.4% expected.
"Just like today's housing starts report for March, industrial production was stronger than expected but the details of the report were not as solid," RDQ economists wrote. "The entire gain in production was due to a jump in the output of utilities, which likely reflects the cold weather in the month. Manufactured output growth for the first quarter as a whole was robust at 5.3% at an annual rate but growth through the quarter was more subdued at 2.1%. We expect manufacturing growth to be solid in 2013 led by production of capital equipment, autos, and construction supplies."