The tax-exempt market has extended its rally into the second half of the week as traders say supply has outweighed demand with cash on the sidelines finally being put to work, and the outlook isn't expected to change anytime soon.

"The market has been crazy," a New Jersey trader said. "I've never seen anything like this. It's just nonstop every day. Especially in the yield grab and that's been continuous for the past month."

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