The municipal market was firmer Friday as long-end yields declined for the second straight day following a pronounced rout that lasted nearly two weeks.

The primary market, which is typically dormant on Fridays, was dominated by a $3.275 billion taxable issuance from California comprised mostly of Build America Bonds.

Tax-exempt yields moved anywhere from five to 10 basis points, according to traders, amid a fairly active secondary market as investors trolled for cheap bond prices established during the sell-off.

“You definitely have a lot of bargain hunters out there, which is to be expected,” a trader in Los Angeles said. “There’s a lot of activity right now as people try to take advantage of these rates.”

In the new-issue market Friday, Citi priced $3.275 billion of taxable debt for California, including $3.025 billion of taxable BABs.

The BABs mature in 2020, 2021, 2026, and 2030, with a term maturity in 2040. Yields range from 5.581% priced at par in 2020, or 3.63% after the 35% federal subsidy, to 7.519% with a 7.6% coupon in 2030, or 4.89% after the ­subsidy.

The bonds were priced to yield between 270 and 400 basis points over the corresponding Treasury yields.

The deal also contains a $250 million taxable component, which matures in 2015, yielding 3.805% with a 3.92% coupon. These bonds were priced to yield 230 basis points over the comparable Treasury yield.

The bonds were originally scheduled to sell Thursday. Pricing was delayed so the issuer could disclose a lawsuit filed Tuesday.

The suit challenges a plan to sell and lease back from the private-entity owner 24 state buildings at 11 sites, according to the Treasurer’s Office.

The suit also prompted the state to push back the pricing of $10 billion of revenue anticipation notes to Thursday from Wednesday.

The state expanded the amount of its $3.275 billion taxable offering from $2.75 billion late Wednesday. The sale was originally expected to total $2 billion.

California’s long-term GO ratings stand at A1 from Moody’s Investors Service and A-minus from Standard & Poor’s and Fitch Ratings.

The Municipal Market Data triple-A scale yielded 3.01% in 10 years Friday, down 10 basis points from Thursday’s 3.01%, while the 20-year scale yielded dropped 10 basis points to 4.05%. The scale for 30-year debt also dropped 10 basis points to 4.40% Friday from 4.50% Thursday.

“Yields are coming in again today, particularly on the long end,” a trader in New York said. “We’ve had a pretty intense sell-off here for the past couple of weeks. It looks like we hit bottom and are doing somewhat of an about-face.”

Friday’s triple-A muni scale in 10 years was at 101.0% of comparable Treasuries and 30-year munis were at 103.5%, according to MMD. Meanwhile, 30-year tax-exempt triple-A general obligation bonds were at 111.7% of the comparable London Interbank Offered Rate.

The Treasury market was mostly firmer Friday. The benchmark 10-year note was quoted near the end of the session at 2.88% after opening at 2.90%. The 30-year bond was quoted near the end of the session at 4.24%, after opening at 4.29%. The two-year note was quoted near the end of the session at 0.51% after opening at 0.49%.

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.