The tax-exempt market continued to churn as complacency in the muni market set in. With little primary issuance this week, munis lacked direction and stalled.

"It's very slow," a trader in Chicago said. "The secondary doesn't have direction and with no primary to take cues from we're just stagnant. Market players are looking for any direction from anywhere they can find it."

He added a few months ago, munis were being driven by Europe, but munis are now driven by U.S. politics and the election. "These days it's the conventions people are looking at," he said. "Either way right now the trading volume isn't deep enough to drive it one way or another."

In the primary market, Morgan Stanley priced $161.2 million of city of Chula Vista, Calif., industrial development revenue refunding bonds for the San Diego Gas and Electric Company, rated Aa3 by Moody's Investors Service, A-plus by Standard & Poor's, and AA-minus by Fitch Ratings.

The bonds were priced at par to yield 1.75% in 2018 and are callable at par in 2015.

JPMorgan sold an additional $75 million of 2004 Series F bonds, subject to the alternative minimum tax, for the same issuer. The bonds hold the same ratings. Prices were not available by press time.

In the competitive market, Citi won the bid for $233.3 million of Florida Board of Education public education capital outlay refunding bonds, rated Aa1 by Moody's and AAA by Standard & Poor's and Fitch. Pricing details were not available by press time.

On Tuesday, the 10-year Municipal Market Data yield fell one basis point to 1.73%. The 30-year yield closed steady for the third session at 2.89% and the two-year closed at 0.29% for the 28th consecutive session.

The 10-year yield now remains only 13 basis points above its record low of 1.60% set July 26. The 30-year trades only 10 basis points above the 2.79% record low set July 25.

Treasuries continued to weaken in Wednesday afternoon trading. The benchmark 10-year yield jumped two basis points to 1.60% while the 30-year yield increased three basis points to 2.71%. The two-year yield rose one basis point to 0.25%.

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