NEW YORK – The tax-exempt market continued to weaken as overwhelming supply forced yields higher.

“Munis are still weaker and it’s going to continue,” a New York trader said, adding yields are rising due to supply and demand factors. “There is a lot of supply out there from the past few weeks and new supply in the pipeline and money is going into equities.”

Munis were weaker early Thursday afternoon, according to the Municipal Market Data scale. Yields inside five years rose two basis points while yields on the six- to 16-years rose between one and four basis points. Outside 17 years, yields rose up to two basis points.

On Wednesday, the two-year yield closed three basis points higher at 0.30%. The 10-year yield jumped 13 basis points to finish at 2.17% while the 30-year yield rose 9 basis points to close at 3.40%.

The last time the two-year hit this level was Feb. 6. The 30-year yield hasn’t risen to this level since Jan. 10. The 10-year muni rose to levels not seen since Dec. 5, 2011.

Treasuries were slightly stronger, especially on the short-end. The two-year yield fell three basis points to 0.38%. The benchmark 10-year yield and the 30- year yield each fell one basis point to 2.28% and 3.41%.

In the primary market, Morgan Stanley held preliminary pricing for $277.9 million of Louisville/Jefferson County Metro Government Catholic health initiatives revenue bonds, rated Aa2 by Moody’s Investors Service and AA by Standard & Poor’s and Fitch Ratings.

Yields ranged from 0.52% with a 3% coupon in 2013 to 4.35% with a 4.25% coupon and 4.13% with a 5% coupon in a split 2035 maturity. The bonds are callable at par in 2022.

Wells Fargo priced $175.7 million of Charlotte, N.C., general obligation refunding bonds, rated triple-A by the major rating agencies.

Yields ranged from 0.42% with 5% and 1.25% coupons in a split 2014 maturity to 3.07% with a 5% coupon in 2032. Credits maturing in 2013 were not formally reoffered. The bonds are callable at par in 2022.

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