The tax-exempt market continued to post gains Thursday morning as munis followed Treasuries higher.

"It seems like with the Treasury rally, munis have got a pretty firm bid out there," a Virginia trader said. "Deals seem to be going well and the secondary seems to be going fine."

He added that the market feels as much as two basis points stronger out in 10- to 15-year maturities.

In the primary market, JPMorgan is expected to price for institutions $1.3 billion of Regents of the University of California general revenue bonds, rated Aa1 by Moody's Investors Service, AA by Standard & Poor's, and AA-plus by Fitch Ratings.

In the competitive market, Boston is expected to auction $150.6 million of general obligation bonds, rated Aaa by Moody's and AA-plus by Standard & Poor's.

Municipal bond market scales finished stronger Wednesday.

Yields on the Municipal Market Data triple-A GO scale ended as much as three basis points lower. The 10-year yield fell two basis points to 1.81% while the 30-year yield dropped one basis point to 2.91%. The two-year closed at 0.31% for the seventh straight session.

Yields on the Municipal Market Advisors 5% coupon triple-A benchmark scale closed as much as one basis point lower. The 10-year and the 30-year yield fell one basis point each to 1.83% and 2.99%, respectively. The two-year was steady at 0.33% for the second session.

Treasuries were stronger Thursday morning. The benchmark 10-year yield fell one basis point to 1.90% while the 30-year yield dropped two basis points to 3.09%. The two-year was steady at 0.25%.

In economic news, real gross domestic product increased at an annual rate of 0.1% in the fourth quarter of 2012, according to a preliminary estimate. The 0.1% increase fell short of the 0.5% expected by economists, but was better than the 0.1% decline reported in the advance estimate.

"We still believe that GDP does a poor job in capturing underlying activity and we think fourth-quarter activity was stronger than suggested by these data," wrote economists at RDQ Economics. "The upward revision to fourth-quarter growth was blunted by a higher inflation reading, although even combining the price and quantity revisions, recorded nominal growth of 1.0% in the fourth quarter remains anemic. The report does not change the picture of moderately solid growth in consumer spending in the fourth quarter and robust investment growth in housing and business equipment and structures. We look for real growth in 2013 of around 2.5% and expect the first quarter to be close to this pace."
In other economic news, initial jobless claims fell 22,000 to 344,000 for the week ending Feb. 23; economists expected 360,000.

"Eight weeks into the new year and the unemployment claims data suggest the pace of job losses may have slowed slightly from that seen in the fourth quarter," RDQ economists wrote. "This conclusion is tentative because of the volatility of claims early in the new year and because of the provisional nature of the current seasonal adjustment factors. The key to job creation in the coming months would appear to be the pace that new job openings are filled since neither the claims data nor layoff announcements suggest a pickup in job separations."

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