Trading activity in the tax-exempt market slowed Thursday as traders said demand continues to outweigh supply, and isn't expected to reverse course anytime soon.

"It's pretty boring because of the lack of inventory and yield," a New Jersey trader said. "There is no relief on the horizon either, unfortunately."

He added that increased supply is expected to come but it won't be enough to offset the demand. "The calendar has been steady around $7 billion in new issues, but I don't think there will be any noticeable change with munis until we see double that - or at least close to it. There is still too much cash and demand out there for the market to open up yet."

In the primary market, Morgan Stanley priced $350 million of Guam Power Authority revenue bonds, rated Baa3 by Moody's Investors Service, BBB by Standard & Poor's, and BBB-minus by Fitch Ratings. Prices were not available by press time.

In the competitive market, Citi won the bid for $228 million Florida Department of Transportation bonds, rated Aa1 by Moody's and AAA by Standard & Poor's. Prices were not available by press time.

On Wednesday, the 10-year Municipal Market Data yield dropped two basis points to 1.67% while the 30-year yield finished flat at 2.84%. The two-year closed flat for the seventh session at 0.30%.

Since munis began their steady to firmer streak on Sept. 17, the 10-year yield has plummeted 26 basis points from when it traded at 1.93%. The 30-year yield has plunged 22 basis points from when it traded at 3.06%.

The 10-year now hovers only seven basis points above its record low of 1.60% set July 26. The 30-year trades only five basis points above is record low of 2.79% hit July 25.

Treasuries continued to weaken Thursday afternoon. The benchmark 10-year yield increased three basis points to 1.65% while the 30-year yield jumped four basis points to 2.86%. The two-year yield rose one basis point to 0.24%.

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