Municipal bond traders are waiting to see if tax-exempt yields will follow Treasuries Friday and strengthen at the long end of the curve.

Treasury yields at the short end continue to rise following the Federal Reserve's Wednesday announcement that it will begin tapering its bond buying. But yields for 30-year bonds have declined appreciably Friday.

Any follow-though on the part of munis may be muted, though, by the fact that many industry participants are away from their desks on the Friday before Christmas, a trader in New York said.

"It's a little better tone on the longer end of the Treasury market this morning," he said. "We may have some selective buying in munis. But it's probably very selective at this point in the week, before the holidays."

Treasury yields had been affected by the Federal Open Market Committee announcing it would cut the rate of its purchases of longer-term Treasuries and mortgage-backed securities to $75 billion per month from $85 billion per month.

The market expects slight issuance to arrive during the holiday week.

On the demand side, muni bond mutual funds recorded a 30th straight week of outflows from weekly reporting funds, according to Lipper FMI numbers. They reported outflows of $1.71 billion for the week of Dec. 18, from outflows of $1.90 billion one week earlier.

Industry watchers suggest that the past two weeks' $3.61 billion flowing from muni bond funds, a large uptick from the previous few months' numbers, mostly stemmed from tax-loss selling on the part of investors.

Yields on the Municipal Market Data triple-A scale Friday appear steady across the curve.

The triple-A, tax-exempt 10-year closed Thursday four basis points higher at 2.75%. The 30-year rose two basis points to 4.18%. The two-year yield held at 0.33% for a 25th consecutive session.

Yields on the Municipal Market Advisors benchmark triple-A scale weakened mostly beyond three years on the curve by as much as four basis points. The 10-year rose three basis points to 2.77%. The 30-year increased two basis points 4.42%. The two-year held at 0.36%.

Treasury yields have risen at the short end of the yield curve and fallen thereafter to start Friday's session. The benchmark 10-year yield has decreased three basis points to 2.91%, while the 30-year yield has plunged six basis points to 3.85%. The two-year has climbed two basis points to 0.39%, part of a six-basis-point rise on the week.

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