The tax-exempt market traded slightly firmer Monday afternoon as traders said a stronger tone from last week continued into early this week. Stability in the muni market was also helped by stronger Treasuries.

"The muni market at the end of last week started to get a firmer tone in the secondary and that's followed through today," said Pete Stare, senior underwriter at FirstSouthwest. "The market feels better."

He added the front end of the curve is trading steady, and the market is firmer in longer duration bonds. "Bonds past 10 years that got hit the worst in late December are doing well. They are a few basis points higher, but it's not a full-fledged rally."

A slight increase in supply should be welcomed by the market. "We are getting a little test for the market this week with a new issue calendar of between $2 and $3 billion," Stare added. "It's not an overwhelming amount but the Ohio competitive deal is a key bellwether and should give direction for the market."

On Friday, the Municipal Market Data scale finished slightly weaker for the third consecutive session. The 10-year and 30-year yield rose two basis points each to 1.80% and 2.89%, respectively. The two-year closed flat at 0.36% for the third consecutive session.

Treasuries were stronger Monday afternoon. The benchmark 10-year yield fell two basis points to 1.90% while the 30-year yield fell one basis point to 3.10%. The two-year was steady at 0.28%.

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