After a six-week selloff that pushed tax-exempt yields more than 60 basis points higher, munis were active and posted small gains Friday morning.

Traders said the market found its footing and stopped the free fall, for now.

"Maybe we have found a bit of stability, but it's a little early to say for sure," a Texas trader said. "But today it feels like we stopped just free falling."

The last few weeks have been brutal, the trader said. "There was a lot of blood taken. Some people that just bought bonds literally a week or two ago just fell on the sword and there were some really ugly trades. But, retail appears to be coming back in a much bigger way than they have in quite a while."

Thursday, yields on the Municipal Market Data scale ended as much as three basis points higher. The 10-year and 30-year yields were flat at 2.27% and 3.52%, respectively. The two-year was also steady at 0.31% for the second session.

Muni yields on the Municipal Market Advisors 5% scale also closed as much as three basis points higher. The 10-year and 30-year yields climbed three basis points each to 2.36% and 3.64%. The two-year was steady at 0.39% for the second session.

Treasuries were stronger on worse-than-expected economic news. The benchmark 10-year yield slid six basis points to 2.12%. The two-year and 30-year yields slipped three basis points each to 0.29% and 3.30%, respectively.

In economic news, the producer price index rose 0.5% in May, offsetting the 0.7% drop in April, a larger gain than expected. The core PPI rose 0.1%, in line with expectations.

"The headline PPI gain was somewhat above expectations on higher food and energy prices but the rest of the report was fairly benign on the inflation front," wrote economists at RDQ Economics. "Despite the energy price gain in May, headline finished goods prices have fallen at a 3.0% annualized rate over the last three months and core finished goods prices have advanced at an annualized rate of only 1.3% on the same basis. In short, there is nothing to worry the Fed here on the inflation front."

In other economic news, industrial production was flat in May while capacity use slipped to 77.6% from 77.7% in April. Economists had expected a 0.2% increase in industrial production a 77.9% capacity use.

"This is a slightly disappointing report that shows manufacturing contracting at an annualized rate of 2% over the last three months on balance," RDQ economists wrote. "This report suggests that manufacturing faces headwinds at the present time, which we see related to difficulties in the global economy and a subdued recovery in capital spending."

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