Activity in the tax-exempt market started to slow Friday morning after a hectic week in the primary.

Traders said the market felt quiet. "Munis are quiet but weak still," a New York trader said. He added the market traded softer by a few basis points but there weren't enough trades to make a strong conviction either way.

On Thursday, municipal bond market scales ended weaker for the fourth session this week.

Yields on the Municipal Market Data triple-A GO scaled ended as much as four basis points higher. The 10-year yield rose one basis point to 2.00% while the 30-year yield increased three basis points to 3.14%. The two-year finished flat at 0.31% for the 18th consecutive session.

Yields on the Municipal Market Advisors 5% coupon triple-A benchmark scale climbed as much as five basis points. The 10-year yield jumped two basis points to 2.03% while the 30-year yield spiked four basis points to 3.22%. The two-year held at 0.33% for the 13th session.

Treasuries were stronger Friday morning after a softer session Thursday. The benchmark 10-year yield fell three basis points to 2.01% while the 30-year dropped two basis points to 3.22%. The two-year was steady at 0.27%.

In economic news, the consumer price index rose 0.7% in February while the core rate increased 0.2%. Economists had expected a 0.5% gain in the headline number and a 0.2% increase in the core rate.

"Although this is hardly a scary inflation report there is nothing here that suggests inflation is likely to run below the Fed's 2% target," wrote economists at RDQ Economics. "Both the headline and core CPI inflation rates are running at 2% over the last 12 months and ahead of that rate over the last three months. Across major categories of spending, the only one to show a decline in prices over the last three months was autos. We believe the Fed is too worried about disinflation."

In other economic news, industrial production jumped 0.7% in February while capacity use ticked up to 79.6%. The February gain in industrial production was higher than the 0.4% increase expected by economists. Capacity also beat the 79.3% predicted.

"The increase in manufactured output was larger than our above-consensus forecast in February and this is becoming a theme," RDQ economists wrote. "In the last two weeks we have seen manufacturing ISM, nonmanufacturing ISM, ADP employment, payrolls, jobless claims, retail sales, and industrial production beat expectations and show an upswing in economic activity. We do not believe that these data can be attributed to generous seasonal adjustment factors since February saw what seemed to be its fair share of winter storms. It appears that real economic growth is on an upswing and the early indicators for March hint that this momentum is being maintained into this month."

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