The tax-exempt market struggled to wake up Monday morning as traders reported quiet conditions with little activity.

"Munis aren't getting any action," a New York trader said. "It's pretty quiet." Most traders were waiting for the week's supply to hit the market.

In the primary market this week, tax-exempts should see $7.38 billion issued, up from last week's revised $6.31 billion. On the negotiated calendar, $5.75 billion is expected to be priced, up from last week's revised $4.80 billion. In competitive deals, $1.63 billion is expected to be auctioned, up from last week's revised $1.50 billion.

Later today, Wells Fargo Securities should price for retail $950 million of New York's Metropolitan Transportation Authority bonds, rated AA by Standard & Poor's and AA-minus by Fitch Ratings. Institutional pricing is expected Tuesday.

On Friday, the 10-year Municipal Market Data yield fell one basis point to 1.69% while the 30-year yield dropped two basis points to 2.84%. The two-year yield finished flat at 0.30% for the 13th consecutive trading session.

Treasuries were flat to slightly stronger Monday morning. The two-year yield and the benchmark 10-year yield fell one basis point each to 0.26% and 1.66%, respectively. The 30-year was steady at 2.84%.

In economic news, retail sales rose 1.1% to $412.9 billion in September following a revised 1.2% increase in August. The September figures are the second consecutive month of better-than-expected results and beat the 0.8% figure economists had expected.

"The consumer appears to have put in a solid month of spending growth in September and over the last three months nominal spending growth has perked up significantly," wrote economists at RDQ Economics. "Part of the pickup appears to be price-related on the surge in gasoline prices but with solid increases in furniture, auto sales, and apparel, this is not the whole story. It appears that real PCE growth is tracking closer to 2.25% than 1.75%, which was our projection for the quarter prior to this release. However, the labor market has remained relatively sluggish and there are significant tax hikes lurking round the corner in 2013 if Congress fails to address the fiscal cliff."

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