The municipal market was slightly weaker yesterday as it returned from a long weekend with fairly light trading activity.

“It’s a bit slow to start, but there’s a little bit of weakness,” a trader in New York said. “I’m not sure. I’d call it down by more than a basis point or so, but there’s definitely somewhat of a weaker tone out there.”

“There wasn’t too much activity out there, but it’s a Monday coming off the holiday weekend, so that’s not exactly a huge shocker,” a trader in Los Angeles said. “I do think you’re going to see activity pick up over the next few days, and into next week, now that the holidays are behind us. Today, we’re probably a touch weaker, but it’s been fairly quiet.”

The Treasury market was mixed yesterday. The yield on the benchmark 10-year note opened at 3.84% and was quoted near the end of the session at 3.83%. The yield on the two-year note opened at 1.14% and was quoted near the end of the session at 1.08%. The yield on the 30-year bond was quoted near the end of the session at 4.65% after opening at 4.66%.

Yesterday’s Municipal Market Data triple-A scale yielded 3.04% in 10 years and 3.77% in 20 years, after levels of 2.98% and 3.68%, respectively, Thursday. The scale yielded 4.16% in 30 years yesterday, following Thursday’s level of 4.13%.

As of Thursday’s close, the triple-A muni scale in 10 years was at 77.5% of comparable Treasuries and 30-year munis were 88.9% of comparable Treasuries, according to MMD, while 30-year tax-exempt triple-A general obligation bonds were at 92.2% of the comparable London Interbank Offered Rate.

In the new-issue market this week, some of the biggest bond sales on tap are Build America Bonds, following a year in which issuers sold $64.15 billion of the experimental bond class created under the American Recovery and Reinvestment Act.

Municipalities are slated to sell $6.74 billion of bonds this week, having sold $3.23 million last week. The biggest deal by far is Illinois’ $3.47 billion taxable general obligation sale, which will be priced by JPMorgan Thursday.

The deal is broken into five pieces, each with a principal of $693.2 million. One piece will expire Jan. 1 of each year from 2011 through 2015. The bonds are callable with a make-whole provision. The proceeds of the sale will be deposited in the state’s Pension Contribution Fund, which funnels payments to Illinois’ five retirement funds for state employees like teachers and judges.

Moody’s Investors Service rates the credit A2 after downgrading it last month. Fitch Ratings assigned an A rating to the state’s offering, while placing Illinois’ $19.4 billion of GO debt on negative watch. Standard & Poor’s downgraded Illinois to A-plus last month.

Another major deal is the New Jersey Transportation Trust Fund Authority’s $850 million offering Thursday, of which $357.9 million will be BABs and the rest will be tax-exempt.

Managed by Barclays Capital, the sale will raise proceeds to finance transportation projects in the Garden State. Moody’s rates the deal A1. The rating is a notch lower than New Jersey’s rating because of the risk that the state decides not to appropriate the money to the transportation fund to repay its bonds.

Trades reported by the Municipal Securities Rulemaking Board yesterday showed losses. Bonds from an interdealer trade of insured Hawaii 5s of 2026 at 3.73%, one basis point higher than where they were sold Thursday. A dealer sold to a customer New Jersey TTFA 5.5s of 2022 at 4.06%, one basis point higher than where they were sold Thursday.

A dealer sold to a customer California 5s of 2022 at 4.40%, two basis points higher than where they were sold yesterday. A dealer sold to a customer taxable New Orleans BABs 8.8s of 2039 at 8.30%, up one basis point from where they were sold Thursday.

Bonds from an interdealer trade of New York State 5.21s of 2031 at 5.92%, up two basis points from where they were sold Thursday. Bonds from an interdealer trade of Illinois Finance Authority 5.75s of 2037 at 5.88%, two basis points higher than where they were sold yesterday.

A dealer sold to a customer taxable Massachusetts School Building Authority BABs 5.72s of 2039 at 5.77%, up two basis points from where they were sold Thursday. Bonds from an interdealer trade of Miami 5.63s of 2039 yielded 5.69%, three basis points higher than where they traded Thursday.

A dealer sold to a customer Maryland Health and Higher Educational Facilities Authority 5s of 2034 at 5.14%, one basis point higher than where they were sold Thursday. Bonds from an interdealer trade of insured Midland College District, Tex., 5s of 2023 at 3.73%, one basis point higher than where they traded Thursday.

In economic data released yesterday, construction spending fell 0.6% in November to a seasonally adjusted annual rate of $900.1 billion, the seventh consecutive monthly decline. Economists expected construction spending to fall 0.4% in November, according to the median estimate from Thomson Reuters.

According to the Institute for Supply Management’s monthly report on business, the ISM index gained to 55.9 in December from 53.6 in November. Economists polled by Thomson Reuters predicted the index would rise to 54.3.

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