Underwriters in the tax-exempt market cut prices and raised yields as investor demand waned Tuesday afternoon.

Despite an afternoon Treasury rally after Federal Reserve Bank of St. Louis President James Bullard's comments in favor of continuing the Fed's asset purchase program, munis still looked rich to Treasuries.

"It's a little tough in here," a New York trader said. "Muni rates have backed up but interest seems to be weak at this point. There is cash around but people expect rates to back up further or think they should."

"There is no real relative benefit to buy munis versus Treasuries or other fixed-income products," he added. "Several weeks ago munis were trading at higher yields than comparable Treasuries and now that's not the case. Rates have to back up a little more to get strong demand. Even with cash, there is no urgency to put it to work."

Bank of America Merrill Lynch held a second retail order period on $944.7 million of New York City general obligation bonds, rated A2 by Moody's Investors Service and AA by Standard & Poor's and Fitch Ratings. Institutional pricing is expected Wednesday.

Yields on the first series of $266.6 million ranged from 0.44% with 2% and 3% coupons in a split 2015 maturity to 2.33% with 3% and 4% coupons in a split 2023 maturity. Bonds maturing in 2013 and 2014 were offered via sealed bid. Bonds maturing in 2024 and 2025 were not offered for retail. The bonds are callable at par in 2023. Yields were increased five basis points from the first retail order period Monday.

Yields on the second series of $678.1 million ranged from 0.44% with a 5% coupon in 2015 to 3.00% priced at par in 2027. Bonds maturing in 2014 were offered via sealed bid. Portions of bonds maturing in 2015, 2016, 2024 and 2025 were not offered for retail. The bonds are callable at par in 2023. Yields were increased five basis points from Monday's retail order period.

Goldman, Sachs & Co. priced for retail $452.1 million of Los Angeles Department of Water and Power System revenue bonds, rated Aa3 by Moody's and AA-minus by Standard & Poor's and Fitch. Institutional pricing is expected Wednesday.

Yields ranged from 0.78% with 3%, 4% and 5% coupons in a split 2017 maturity to 2.99% with a 5% coupon in 2032. The bonds are callable at par in 2023.

Raymond James is expected to price for institutions $117.8 million of Dormitory Authority of the State of New York school districts revenue bond financing programs, following retail pricing Monday.

In retail pricing, the first series of $35.4 million, yields ranged from 0.70% with a 2% coupon in 2015 to 3.29% with a 4% coupon in 2028. The series is rated A-plus by Standard & Poor's and Fitch. Bonds maturing in 2013 were offered via sealed bid. Bonds maturing between 2016 and 2028 were insured by Assured Guaranty Municipal Corp. The bonds are callable at par in 2023.

The second series of $7.6 million is rated AA by Standard & Poor's and A-plus by Fitch. Yields ranged from 0.45% with a 2% coupon in 2014 to 3.81% with a 4% coupon in 2042. The bonds are callable at par in 2023.

The third series of $28.6 million is rated AA-minus by Standard & Poor's and A-plus by Fitch. Yields ranged from 0.60% with a 2% coupon in 2015 to 3.54% with a 3.5% coupon in 2032. Bonds maturing in 2014 were offered via sealed bid. The bonds are callable at par in 2023.

The fourth series of $6.3 million is rated Aa3 by Moody's and A-plus by Fitch. Yields ranged from 0.50% with a 3% coupon in 2014 to 3.86% with a 4% coupon in 2042. The bonds are callable at par in 2023.

The fifth series of $39.9 million is rated A-plus by Standard & Poor's and Fitch. Yields ranged from 0.80% with a 2% coupon in 2015 to 3.39% with a 4% coupon in 2028. Bonds maturing between 2016 and 2028 were insured by AGM. Credits maturing in 2014 were offered via sealed bid. The bonds are callable at par in 2023.

In the competitive market, Bank of America Merrill Lynch won the bid for $216.7 million of triple-A rated Prince George's County, Md., GOs.

Yields ranged from 0.19% with a 5% coupon in 2014 to 3.22% with a 4% coupon in 2033. The bonds are callable at par in 2023. Spreads on bonds with 5% coupons were as much as five basis points above Monday's Municipal Market Data scale.

Yields on the Municipal Market Data scale were as much as three basis points weaker Monday. The 10-year yield increased one basis point to 1.83% and the 30-year yield jumped three basis points to 3.00%. The two-year held steady at 0.28% for the eighth session.

The Municipal Market Advisors 5% scale showed yields rising as much as two basis points. The 10-year and 30-year yields increased one basis point each to 1.89% and 3.11%. The two-year yield held steady at 0.33% for a seventh consecutive session.

Treasuries reversed Monday's losses and then some after Bullard said the Fed should continue its $85 billion asset buying program. The benchmark 10-year yield dropped four basis points to 1.93% and the 30-year yield slid five basis points to 3.13%. The two-year was steady at 0.25%.

Subscribe Now

Independent and authoritative analysis and perspective for the bond buying industry.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.