The tax-exempt market was mostly steady Thursday morning, even as Treasuries were weaker on a surging stock market.

Limited supply and steady demand is helping keep yields at record lows despite some resistance from traders.

Munis were steady to slight stronger Thursday morning, according to the Municipal Market Data scale. Yields inside eight years were flat while the nine- to 12-year yields fell one basis point. Outside 13 years, yields were steady.

On Wednesday, the 10-year and 30-year yields each closed down one basis point to set record lows. The 10-year closed at 1.61%, breaking the previous record of 1.62% set Tuesday. The 30-year yield ended the day at 2.79%, breaking the previous record of 2.80% set Tuesday. The two-year closed at 0.31% for the eighth consecutive trading session.

The tax-exempt market has been steady or firmer for 23 consecutive sessions. Since the most recent rally began on June 22, yields on the 10-year have fallen 25 basis points while the 30-year yield has plunged 37 basis points.

Treasuries were weaker while stocks surged as Euro fears subsided. The benchmark 10-year yield and the 30-year yield increased two basis points each to 1.42% and 2.48%, respectively. The two-year yield rose one basis point to 0.23%.

In the primary market, Barclays Capital is expected to price for institutions $900 million of University of California Regents limited project revenue bonds in tax-exempt and taxable series, following a retail order period Wednesday. The bonds are rated Aa2 by Moody's Investors Service, AA-minus by Standard & Poor's and AA by Fitch Ratings.

The first series includes $800 million of tax-exempt bonds and the second series contains $100 million of taxable paper.

In economic news, new orders for manufactured durable goods rose 1.6% in June, or $3.4 billion, to $221.6 billion. The increase in orders came after a 1.6% jump in May. The durable goods orders beat analysts' expectations of a 0.4% jump.

"There is something for everyone in this durable goods orders report," wrote economists at RDQ Economics. "Orders excluding transportation were weaker than expected in June but these orders for May were revised higher and the second quarter was less weak than the first quarter. Our reading of this report is that the manufacturing sector is going through a weak patch with orders excluding transportation falling over the last three months."

In other economic news, initial jobless claims fell 35,000 to 353,000 for the week ending July 21. Analysts expected 380,000 claims.

Continuing claims fell 30,000 to 3.287 million for the week ending July 14, the lowest level since May 19.

"Though the Labor Department noted nothing unusual in the claims data this week, this report covers a week that is still close to the period during which claims are affected by seasonal adjustment distortions related to summer factory retooling shutdowns," wrote RDQ economists. "It would be an encouraging sign for labor market conditions if initial jobless claims maintain the level reported for the third week of July for a couple more weeks. However, it is too soon to draw any conclusions from the level of claims in this report."

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