The tax-exempt market traded lower Friday morning after a strong week as the market took a breather.

"Munis are off," a New York trader said. "There seems to be better sellers. They have been rallying pretty good so munis are taking a break."

On Thursday, the Municipal Market Data scale ended steady to slightly weaker. The 10-year yield rose one basis point to 1.70%. The two-year and 30-year yields finished steady at 0.34% and 2.80%, respectively.

Treasuries were slightly weaker. The benchmark 10-year yield and the 30-year yield rose one basis point each to 1.91% and 3.09%, respectively. The two-year was steady at 0.26%.

In economic news, the U.S. international trade deficit was $48.7 billion in November, up 15.8% from the revised $42.1 billion shortage in October. The figure resulted from $182.6 billion of exports and $231.3 billion of imports. The deficit was larger than the $41.3 billion economists had predicted.

"From a GDP accounting perspective, the surge in imports and associated widening of the trade gap amount to a statistical drag on growth of around 0.6 percentage points, which is wider than we were looking for in our 2% projection for fourth-quarter growth," wrote economists at RDQ Economics. "At this point, it looks as if real GDP growth is more likely to come in around 1.5% to 1.75%."

They added, "From an economic analysis perspective, however, the broad-based surge in imports is consistent with rising demand growth, which is not a sign of weakness."

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