The tax-exempt market started off on a quiet note Friday morning as most traders were looking ahead to the three-day weekend.

After substantial firming throughout the week, muni bonds were trading steady with lighter activity.

"It's quiet so far," a Chicago trader said. "Spreads are getting awful tight here. If we get some real supply, we'll see how deep the current bid-side is."

On Thursday, the Municipal Market Data scale ended lower after four consecutive sessions of gains. The 10-year yield rose two basis points to 1.67% while the 30-year yield increased three basis points to 2.72%. The two-year finished steady at 0.33% for the third session.

The 10-year yield now trades 20 basis points above its record low of 1.47% set Nov. 28. The 30-year yield trades 25 basis points above its record low of 2.47% set Nov. 28.

Treasuries were stronger Friday morning after posting losses Thursday. The benchmark 10-year yield and the 30-year yield fell three basis points each to 1.85% and 3.04%, respectively. The two-year was steady at 0.27%.

In the primary market next week, $9.19 billion is expected to price, up from this week's revised $5.89 billion. On the negotiated calendar, $6.66 billion is expected to come to market, up from this week's revised $5.03 billion. In competitive deals, $2.53 billion is expected to be auctioned, up from this week's revised $862 million.

In other muni bond news, Moody's Investors Service cut its rating on Assured Guaranty Municipal Corp. two notches to A2.

Most traders said immediate market reaction was muted as it's a quiet Friday before a three-day holiday weekend. Most of the fallout should come in the retail market early next week.

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