The municipal market will see about  $1 billion less in new issuance this week after struggling to digest last week’s supply as yields rose across the curve, forcing some issuers to stay on the sidelines until yields fall again.

The muni market can expect $6.93 billion in new issuance for the Columbus Day holiday-shortened week, down from last week’s revised $8.12 billion.

The cut in volume is much needed for a market that was overwhelmed by supply last week and had to drop prices to entice buyers.

“Issuance in the last few weeks was more than we had in the first three quarters on a weekly basis, so that’s certainly weighing on the market,” said Mark DeMitry, senior portfolio manager of OppenheimerFunds’ Rochester municipal investment team, adding that global macro concerns were also weighing on investors as Treasury yields rose along with munis.

“All those factors played a role in getting those deals done,” he said.

DeMitry said many deals last week had to take concessions in order to find buyers, which could be pushing some issuers to wait to come to market until yields steady.

“A reduction in supply should be a good thing for the market to take a breather,” he said. “A lot of supply has come in the intermediate part of the curve and that’s the part of the curve that has seen the biggest increase in yields and fall in prices.”

The negotiated calendar will see $6.24 billion this week, up from last week’s revised $6.04 billion. The competitives will take the biggest hit, falling to $684.9 million from last week’s $2.18 billion.

The biggest deal comes in the negotiated market Thursday, when Washington will issue almost $1.3 billion, its largest deal ever. This sale beats the previous record held by the state, when it issued $1.16 billion last year of motor vehicle fuel tax general obligation bonds.

The deal will be comprised of $772.24 million of refunding bonds and $516.77 million of new-money bonds. In the refunding portion, $656.14 million are Series R-2012A various-purpose refunding GOs. The second portion of the refunding is $116.1 million of Series R-2012B motor vehicle fuel tax GO refunding bonds.

The new money consists of $516.77 million of Series 2012C motor vehicle fuel tax GO bonds, which will finance a State Route 520 floating-bridge replacement project. The bonds have maturities ranging from 2017 to 2041.

Despite rising yields, a spokesman for the state treasurer said last week he believes it is a good time to finance and refinance, given low interest rates.

The lead underwriter is JPMorgan. The bonds are rated Aa1 by Moody’s Investors Service and AA-plus by Standard & Poor’s and Fitch Ratings.

New York City’s Transitional Finance Authority is coming to market with $750 million of bonds. The lead manager is Bank of America Merrill Lynch.

Tennessee is coming to market with almost $600 million of GO bonds in two pricings. The first will consist of $374 million of serial bonds on Thursday with maturities from 2012 to 2031. They are rated triple-A by Moody’s and Fitch and AA-plus by Standard & Poor’s. Citi is the lead book-runner.

The state will also issue $223.2 million of federally taxable GO 2011 Series C bonds.

Underwritten by JPMorgan, the bonds are rated triple-A by Moody’s and Fitch and AA-plus by Standard & Poor’s. Indications of interest will be taken Tuesday and coupons will be set Wednesday.

The competitive market won’t see much action, with only two deals topping $100 million.

Michigan Wednesday will issue $139 million of GOs in three pricings, followed Thursday with a $116 million Lexington County, S.C., school district GO sale in two pricings.

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