The tax-exempt market extended its string of gains to an eighth session Friday as muni prices continued to climb on limited new-issue muni supply and bullish sentiment from buyers left over from the Federal Reserve’s decision Wednesday to maintain economic stimulus.

Yields on the benchmark municipal bond scales ended as much as three basis points lower Friday, pushing 10-year yields down more than 20 basis points for the week.

One trader in Chicago said after unloading inventory during the selloff, dealers were replenishing supply in order to sell to customers. “I’ve been able to get business done and buy more today than the last couple days,” he said. “Guys need inventory to be able to show things so there are a lot more secondary trades.”

This trader added that much of the demand has been for shorter-maturing bonds. “You can sell into the frenzy and make some money but right now it’s hard to justify selling,” the trader said. “The short-end of the market has been extremely strong. The longer-end has gotten the benefit of this but that could be a lot more vulnerable than the short-end.”

Still, this trader said the market is reaching a saturation point and could reverse directions at any time. “We’ve had a huge run based on the lack of supply, but if all of a sudden issuers want to take advantage of rates and come into the market, you could see this rally change direction.”

Other traders said the market started to slow a bit after busy trading Wednesday and Thursday following the announcement from the Federal Reserve there would be no changes to its bond purchasing program. “There was more activity earlier this morning but it’s starting to slow now,” a New York trader said. He said prices were unchanged in early trading.

In the secondary market, trades compiled by data provider Markit showed all firming.

Yields on New Jersey Tobacco Settlement Financing Corp. 5s of 2041 fell six basis points to 7.22% and Illinois 5.1s of 2033 fell four basis points to 6.28%.

Yields on Omaha Public Power District 5s of 2034 and California State Department Water Resources 5s of 2022 slipped three basis points each to 4.24% and 2.49%, respectively.

Yields on Hawaii 5s of 2024 and Lakeland, Fla., Educational Facilities 5s of 2042 fell three basis points each to 3.06% and 5.56%, respectively.

On Friday, yields on the triple-A Municipal Market Data scale ended as much as three basis points lower. The 10-year yield fell one basis points to 2.60% and the 30-year yield dropped three basis points to 4.20%. The two-year yield fell two basis points to 0.36%.

Yields on the Municipal Market Advisors scale also ended as much as three basis points lower. The 10-year yield fell two basis points to 2.75%. The two-year and 30-year yields were flat at 0.54% and 4.31%, respectively.

Treasuries were stronger Friday. The benchmark 10-year yield fell one basis point to 2.74% and the 30-year yield slid three basis points to 3.77%. The two-year was steady at 0.34%.

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