The tax-exempt market extended its five-day losing streak into the end of the week as traders said an overload of supply overwhelmed the market.

“Today is still weaker,” a New York trader said Friday. “Thursday there was a very strong bid-wanted activity which added to people’s fear of others coming out and selling large blocks of pretty much all different structures. So it’s weaker, but I think a lot of people have now moved to the sidelines to wait and see where things settle at this point.”

Overall for the week, the trader said yields are up significantly on the long end. “It was a combination of a backup in Treasuries, very low rates already, and supply that all came in,” he said.

Other traders said the heavy supply forced muni prices lower throughout the week. “Buyers continued pulling bids back and more sellers hit bids off from recent days,” wrote Dan Toboja, vice president at Ziegler Capital Markets.

Traders continued to react to the downgrade of Puerto Rico by Moody’s Investors Service to its lowest investment grade level and said the market could be volatile for a while, but buyers will not avoid Puerto Rico debt altogether. “With several large mutual fund holders of PR debt it will likely cause some pain as NAVs are taken down,” Toboja said. “However, with such solid fund flows, a slew of redemptions submarining the market does not appear imminent. So it seems unlikely to cause as severe a market shock.”

The New York trader said he didn’t see a big fallout in Friday’s trading session. “Most of our clients were sidelined on Puerto Rico before the news came out.”

On Friday, yields on the Municipal Market Data scale jumped as much as seven basis points. The 30-year yield spiked up six basis points to 2.71%, and climbed 23 basis points throughout the week. The 10-year yield finished steady at 1.66%, but climbed 18 basis points throughout the week. The two-year finished flat at 0.30% for the 55th consecutive trading session.

Treasuries were stronger Friday after three weaker sessions. The benchmark 10-year yield dropped three basis points to 1.71% while the 30-year yield pulled back four basis points to 2.87%. The two-year yield fell two basis points to 0.24%.

As munis cheapened throughout the week, trading activity and par value of bonds traded increased. According to data from the Municipal Securities Rulemaking Board, 50,040 trades took place Tuesday, up from the 30-day average of 37,903. Almost $12 billion in par amount was traded, above the 30-day average of $11.309 billion.

On Wednesday, 51,855 trades occurred, up from the 30-day average of 39,620. Par amount traded was $15.389 billion, well above the 30-day average of $11.813 billion. And by Thursday, 50,439 trades occurred, up from the 30-day average of 40,155. Par amount traded was $17.567 billion, up from the 30-day average of $12.096 billion.

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