The tax-exempt market got off to a slow start Monday as traders said there was some activity but bonds were flat.

"Munis are quiet," a New York trader said. "Some bonds are off, some bonds are up. So it's about steady."

"The almost complete lack of new issue paper is helping support the market although several participants still say they are convinced a large shadow supply is waiting for a more stable market," wrote Dan Toboja, vice president at Ziegler Capital Markets. "Last week outflows were very minimally negative from muni funds. So the pressure to sell has subsided and bid sides have begun to spring up for selective credits and structures."

He added, "The overall tone remains cautious. Desks are very aware of how much damage the fiscal cliff talk did at the end of 2012 and are hesitant to take large positions ahead of what could be a very similar situation in a couple months. Until we get some real leadership from DC and some clarity on the muni exemption [and] debt ceiling, munis will tread with caution in 2013."

In the primary market this week, $2.7 billion of muni bonds are expected to come to market, up from last week's revised $11.7 million. In the negotiated market, $1.72 billion is expected to price, up from last week's revised $4 million. On the competitive calendar, $1.02 billion should be auctioned, up from last week's revised $7.7 million.

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 mostly steady Monday morning. The two-year and benchmark 10-year yields were flat at 0.28% and 1.92%, respectively. The 30-year yield rose one basis point to 3.12%.

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