The tax-exempt market posted gains Thursday afternoon after a large rally Wednesday that pulled yields back down 20 basis points.

The primary deals priced Thursday were well received and traders said the market felt seven to nine basis points stronger. "Who knows how long this will last but 5s at par will be gone soon," a Chicago trader said. "Most everything is back above par."

And while the selloff was painful, traders are looking forward to a higher interest rate environment. "The market needed this," he said. "It's a new landscape and a new rate environment brings more people into the market."

RBC Capital Markets Thursday priced $329.3 million of Phoenix, Ariz., Civic Improvement Corporation transit excise tax revenue refunding bonds, rated Aa2 by Moody's Investors Service and AA by Standard & Poor's.

Yields ranged from 0.80% with 3% and 5% coupons in a split 2015 maturity to 2.57% with 4% and 5% coupons in a split 2020 maturity. Bonds maturing in 2014 were offered via sealed bid.

Siebert Brandford Shank & Co. priced $221.6 million of Metropolitan Washington Airports Authority airport system revenue and refunding bonds. The bonds are rated A1 by Moody's and AA-minus by Standard & Poor's and Fitch Ratings.

Yields on the first series of $210.3 million of bonds subject to the alternative minimum tax, ranged from 2.17% with a 4% coupon in 2018 to 4.91% with a 5% coupon in 2043. The bonds are callable at par in 2023.

Bonds on the second series of $11.3 million yielded 2.45% with a 3% coupon in 2020, 2.73% with a 5% coupon in 2021, and 3.01% with a 5% coupon in 2022.

Wednesday, yields on the MMD scale ended as much as 22 basis points lower. The 10-year yield dropped 20 basis points to 2.61% and the 30-year yield plunged 22 basis points to 3.91%. The two-year yield fell five basis points to 0.50%.

Yields on the Municipal Market Advisors 5% scale fell as much as 18 basis points Wednesday. The 10-year and 30-year yields dropped 17 basis points each to 2.80% and 4.04%, respectively. The two-year yield slipped four basis points to 0.55%.

Treasuries were stronger Thursday afternoon. The benchmark 10-year yield slipped six basis points to 2.49%. The two-year and 30-year yield fell three basis points each to 0.36% and 3.55%, respectively.

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