NEW YORK - The tax-exempt market ended on a lower note after a mixed week, with munis strengthening some days and weakening on others. Still, there were no dramatic changes in yields and traders noted the market only shifted a few basis points.

"At the end of the day we did OK," a Chicago trader said. "It was like playing ping pong over one basis point. It was back and forth."

"There are some buyers out there and some sellers," a New York trader said. "Nothing is really one way. It's mostly steady."

Munis ended slightly weaker Friday after a mixed week, according to the Municipal Market Data scale. Overall for the week, the 10-year yield ended steady at 1.86% for the sixth consecutive trading session while the two-year ended steady at 0.32% for the 16th straight session. The 30-year yield finished up one basis point from the week prior to close at 3.16%.

Treasuries were weaker Friday after a choppy week. The benchmark 10-year yield jumped six basis points to 1.68% while the 30-year yield spiked up seven basis points to 2.75%. The two-year yield rose one basis point to 0.32%.

In the secondary market Friday, trades compiled by data provider Markit showed a mixture of strengthening and firming.

Yields on Florida State Board of Education 5s of 2025 rose three basis points to 2.70% while Puerto Rico Sales Tax Financing Corp. 5.75s of 2057 rose one basis point to 4.13%.

Other trades showed firming. Yields on Phoenix Industrial Development Authority 5s of 2042 and University of Vermont and State Agricultural College 5s of 2038 each fell two basis points to 5.02% and 3.85%.

Muni-to-Treasury ratios fell throughout the week as munis outperformed Treasuries and became relatively more expensive.

The two-year ratio dropped to 100% on Friday from 106.7% on Monday. The 10-year ratio fell to 110.7% on Friday from 117.7%. The 30-year ratio declined to 114.9% from 118% at the beginning of the week.

With volatility and economic uncertainty coming from Europe, investors continue to rush into safe-haven assets, compressing spreads on municipal bonds. Investors have been forced to reach down the credit scale in search of yield.

Yields on investment grade municipal bonds as measured by the S&P National AMT-Free Municipal Bond Index have fallen one basis point in June and have returned 1.82% this quarter and 3.61% year to date, according to J.R. Rieger, vice president of fixed income indexes at Standard & Poor's Indices.

On the other hand, yields on high-yield municipal bonds have fallen four basis points since the start of June and 88 basis points since the beginning of the year. As a result, Rieger said high-yield munis, as measured by the S&P Municipal High Yield Index, returned 3.5% this quarter and 9.77% year to date, outperforming the stock market and the overall bond market.

Over the course of the previous 12 months since June 30, 2011, the S&P high-yield index returned 15.39%, while the investment-grade index returned 10.04%. Conversely, the S&P 500 Index returned 2.56%.

Indeed, some of the best performers have been higher-yielding states. Performance of all credit qualities of bonds issued in California returned 4.70% year to date, followed by New Jersey at 4.51%. Bonds of all qualities issued in Florida returned 4.15% while bonds in Arizona yielded 4.01%. Puerto Rico rounded out the top five, returning 3.96%.

Year to date, some of the poorest performers have been the higher-quality states, including Georgia which returned 2.70% and Utah which returned 2.40%.

In next week's primary market, $8.11 billion in municipal bonds are expected to be priced, down from this week's revised $9.03 billion. In negotiated deals, $6.49 billion is expected, down from this week's revised $7 billion. On the competitive calendar, $1.62 billion is expected to be auctioned, down from this week's revised $2.03 billion.

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