The tax-exempt market continued to weaken throughout Thursday's trading session as traders said the market appeared to cheapen up as the day progressed.

"Bids are cheapening up in the street," a New Jersey trader said. "I'm seeing it loosen up a bit. If clients want out they were better off doing it three days ago."

He added the selloff appears to be somewhat controlled. "It's probably just temporary end of the year stuff."

In the primary market, Guggenheim Securities priced $1.26 billion of Indiana Finance Authority Midwestern disaster area bonds on behalf of the Midwest Fertilizer Corp. The short-term bonds are rated A-1-plus by Standard & Poor's. Pricing details were not available by press time.

JPMorgan priced $781.4 million of California Pollution Control Financing Authority bonds, rated Baa3 by Moody's Investors Service and BBB-minus by Fitch Ratings. The deal consists of a $559.9 million series and a $221.5 million series of water furnishing revenue bonds. Prices were not yet available.

In the competitive market, Jefferies & Co. and Wells Fargo Securities won the bid for $127 million of Philadelphia short-term notes, rated MIG-1 by Moody's and SP-1-plus by Standard & Poor's. Prices were not yet available.

On Wednesday, yields on the Municipal Market Data scale ended as much as four basis points higher after climbing eight basis points Tuesday. The 10-year yield and the 30-year yield jumped four basis points each to 1.62% and 2.69%, respectively. The two-year finished flat at 0.30% for the 53rd consecutive trading session.

Treasuries were weaker though they pared losses from the morning trading session. The two-year yield rose one basis point to 0.26% while the benchmark 10-year yield increased two basis points to 1.72%. The 30-year was steady at 2.90%.

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