The municipal market grew firmer for a second straight session on Wednesday as interest in the primary market helped buoy the secondary, compressing 30-year yields back below 5%.

The nascent rally comes on the heels of last week’s sell-off, which expanded 30-year yields to a two-year high.

“We’re seeing some gains right now,” a trader in New York said. “We’re probably seeing the most gains in the intermediate part of the curve, the 15 to 20-year range, but we’re probably better a solid three basis points all around.”

The Municipal Market Data triple-A 10-year scale fell four basis points Wednesday to 3.42% and the 20-year scale dropped six basis points to 4.79%. Yields for 30-year bonds declined four basis points to 4.98%, dipping back under 5% for the first time since crossing that traditional threshold last Thursday.

Yields for 30-year bonds rarely pass the 5% benchmark and serve as an informal measure of market eccentricity when they do.

In the daily MMD commentary, Randy Smolik wrote that the primary market provided leadership and relief to the secondary Wednesday.

“There was a renewed vigor to own bonds,” he said.

Wednesday’s triple-A muni scale in 10 years was at 102.4% of comparable Treasuries and 30-year munis were at 109.9%, according to MMD. Meanwhile, 30-year tax-exempt triple-A general obligation bonds were at 117.5% of the comparable London Interbank Offered Rate.

Treasuries showed some gains Wednesday. The benchmark 10-year note was quoted near the end of the session at 3.34% after opening at 3.36%. The 30-year bond was quoted near the end of the session at 4.53% after opening at 4.56%. The two-year note was quoted near the end of the session at 0.58% after opening at 0.59%.

In the new-issue market Wednesday, Washington State competitively sold $454.6 million of taxable and tax-exempt GO debt in two series.

The tax-exempt $364.3 million series was sold to Bank of America Merrill Lynch. The bonds mature from 2012 through 2031, with term bonds in 2033 and 2036. Yields range from 1.26% with a 4% coupon in 2014 to 5.00% priced at par in 2029.

Bonds maturing in 2012, 2013, 2016, 2020, 2022, 2023, from 2025 through 2027, and from 2030 through 2036 were sold but not available. The bonds are callable at par in 2021.

The taxable $90.4 million series was sold to Citi. These bonds mature from 2012 through 2020, with yields ranging from 1.48% in 2014 to 3.95% in 2020, all priced at par. Bonds maturing in 2012 and 2013 were not formally re-offered. The bonds were priced to yield between 30 and 70 basis points over the comparable Treasury yield. The bonds are not callable.

The credit is rated Aa1 by Moody’s Investors Service and AA-plus by Standard & Poor’s and Fitch Ratings.

Jefferies & Co. priced $450 million of water and sewer system second general resolution revenue bonds for the New York City Municipal Water Finance Authority.

The bonds mature in 2040 and contain a split maturity in 2043, yielding 5.47% with a 5.375% coupon in 2040 and 5.54% with coupons of 5.375% and 5.5% in 2043. The bonds are callable at par in 2020.

The credit is rated Aa2 by Moody’s and AA-plus by Standard & Poor’s and Fitch.

Goldman, Sachs & Co. priced $197.7 million of taxable and tax-exempt transmission project revenue bonds for the Southern California Public Power Authority in two series.

Bonds from the $170.4 million tax-exempt series mature from 2012 through 2019, with yields ranging from 1.00% with a 5% coupon in 2012 to 3.80% with a 5% coupon in 2019. The bonds are not callable.

Bonds from the $27.3 million taxable series mature in 2011 and 2012, yielding 1.25% priced at par in 2012. Bonds maturing in 2011 were not formally re-offered. The bonds are not callable.

The credit is rated AA-minus by Standard & Poor’s and Fitch.

Morgan Keegan & Co. priced $87.6 million of unlimited-tax school building and refunding bonds for the Liberty Hill Independent School District in Texas.

The bonds mature from 2022 through 2030, with term bonds in 2032, 2035, 2038, and 2040. Yields range from 3.96% with a 5% coupon in 2022 to 5.18% with a 5% coupon in 2040. The bonds are callable at par in 2019.

The deal also contains a set of capital appreciation bonds, which mature from 2015 through 2021. Yields to maturity range from 2.35% in 2015 to 4.39% in 2021. The bonds are not callable.

The bonds are backed by Texas’ Permanent School Fund guarantee program. The underlying credit is rated A1 by Moody’s.

Meanwhile, Loop Capital Markets took indications of interest on $298.8 million of taxable GO bonds for Chicago, with the debt set to yield 310 basis points over the 30-year Treasury yield in its sole maturity in 2035. Institutional pricing is set to follow Thursday.

The credit is rated Aa3 by Moody’s, A-plus by Standard & Poor’s, and AA-minus by Fitch.

In economic data released Wednesday, December housing starts dropped 4.3% to an annualized rate of 529,000 even as building permits headed the other way, jumping 16.7% to 635,000.

Federal officials indicated that the surge in building permits may be related to changes in state building codes for new residential construction effective in California, Pennsylvania, and New York.

Economists expected 550,000 starts and 560,000 building permits in December. November building permits were revised higher to 544,000 from 530,000, and housing starts were revised to 553,000 from 555,000.

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.