The tax-exempt market absorbed one of the largest days of new issuance this week very well as traders said new orders were flowing in during retail order periods. Other traders noted they weren’t getting too excited since the real test will come later this week.

“The secondary is getting their cue from the new-issue calendar,” a New York trader said. “They are pretty steady, but the real test will be when they free up and see if and how those bonds trade in the secondary later this week.”

In the morning, there were buyers in the secondary, he said. “And I guess new deals in the primary are going very well.”

“So far, so good,” a Los Angeles trader said, referring to the $2 billion California deal being priced for retail. “I think there are a lot of orders, but there are a lot of bonds to fill.”

“We are certainly seeing order flow and there are a lot of people sitting on cash so they are putting it to work,” he said. “We’ll see if the demand matches the supply.”

Munis were steady to firmer Tuesday, according to the Municipal Market Data scale. Yields inside nine years were steady while yields outside 10 years fell one basis point.

On Tuesday, the two-year yield ended steady at 0.26%, its record low as recorded by MMD on Feb. 16. The 10-year and the 30-year yields fell one basis point each to 1.84% and 3.22%, respectively.

After strengthening Tuesday morning, Treasuries ended the day weaker, snapping four consecutive days of gains. The two-year yield rose one basis point to 0.30%. The benchmark 10-year yield and 30-year yield jumped two basis points each to 2.95% and 3.07%, respectively.

In the primary market, JPMorgan priced for retail $2 billion of California various purpose general obligation refunding bonds, rated A1 by Moody’s Investors Service and A-minus by Standard & Poor’s and Fitch Ratings.

Yields ranged from 0.66% with 2%, 3% and 5% coupons in a split 2014 maturity to 4.375% priced at par and 4.09% with a 5% coupon in a split 2038 maturity. Credits maturing between 2025 and 2026, between 2028 and 2031, and in 2033 were not offered for retail. The bonds are callable at par in 2022.

Goldman, Sachs & Co. priced $218.9 million of Kentucky Turnpike Authority economic development road revenue bonds, originally scheduled to price Wednesday. The credit is rated Aa2 by Moody’s, AA-plus by Standard & Poor’s, and AA-minus by Fitch.

Yields ranged from 0.82% with 3% and 4% coupons in a split 2016 maturity to 3.70% with a 3.625% coupon and 3.22% with a 5% coupon in a split 2032 maturity. The bonds are callable at par in 2022.

Morgan Keegan & Co. repriced $171.2 million of Lamar Consolidated Independent School District bonds in two series, backed by the Texas Permanent School Fund guarantee program. The underlying rating is Aa2 by Moody’s and AA by Standard & Poor’s.

Yields on the first series, $125.1 million of unlimited-tax schoolhouse and refunding bonds, ranged from 0.50% with a 1.5% coupon in 2015 to 3.50% with a 5% coupon in 2045. Yields were lowered two basis points on credits maturing in 2037 and 2041. The bonds are callable at par in 2022.

Yields on the second series, $46.1 million of unlimited-tax refunding bonds, ranged from 0.62% with a 3% coupon in 2016 to 2.40% with a 4% coupon in 2024. The bonds are callable at par in 2022.

In the competitive market, Washington auctioned $563.7 million of GOs in two pricings of $362.6 million and $201.1 million. The credit is rated Aa1 by Moody’s and AA-plus by Standard & Poor’s.

Citi won the bid for $362.6 million. Yields ranged from 0.67% with a 5% coupon in 2016 to 3.26% with a 5% coupon in 2034. Credits maturing between 2013 and 2015, in 2027, 2035 and 2037 were not formally reoffered. The bonds are callable at par in 2022.

Bank of America Merrill Lynch won the bid for $201.1 million. Yields ranged from 0.13% with a 4% coupon in 2013 to 3.83% with a 4% coupon in 2042. Credits maturing in 2014, 2015, 2030 and 2031 were not formally reoffered. The bonds are callable at par in 2022.

Demand for the bonds, along with the low-yield environment, allowed Washington to get record low rates, according to Treasurer James McIntire. He said the state received nine bids for the $362.6 million deal and eight bids for the $201.1 million piece.

“These remarkable results provide savings at a time when we need them most,” McIntire said. “The Legislature is wrestling with difficult budget decisions to bridge a $1 billion shortfall and every penny counts.”

In the secondary market, trades reported by the Municipal Securities Rulemaking Board showed firming.

Bonds from an interdealer trade of Orlando Capital Improvement 5s of 2027 yielded 2.99%, eight basis points lower than where they traded Monday.

Bonds from another interdealer trade of Port of Seattle 5s of 2031 yielded 3.38%, two basis points lower than where they traded last Friday.

On Monday, muni-to-Treasury ratios rose as munis underperformed Treasuries and became cheaper. The five-year ratio increased to 81% on Monday from 75.6% on Friday. The 10-year ratio jumped to 96.4% from 94.4%. The 30-year muni-to-Treasury ratio increased to 106.2% from 104.8% last week.

Looking at February, ratios tell a different story. The five-year and 30-year ratios fell as munis outperformed Treasuries and became more expensive. The five-year ratio started out February at 100% while the 30-year started out slightly higher at 106.8%. The 10-year muni-to-Treasury ratio was the anomaly, rising from 93.3% at the beginning of the month.

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