The tax-exempt market continued to trade steady to firmer Thursday, following Treasuries, as primary deals were well received.

"It's steady to firmer, with Treasuries more so than munis," a San Francisco trader said. "Munis are OK but less buoyant than Treasuries. I wouldn't be surprised to see slight decoupling between Treasuries and munis."

He added the market is lagging a bit because the 10-year Treasury yield continues to hover around the 2.00% level. "We are still too close to that level. There is momentum in equities and confusion in debt."

Still, the supply-demand factor continues to support munis. "It was a little light in supply this week," the trader added. "There is hope and additional consideration for a little bump in refundings due to the SLGs window opening up again. But we haven't seen a surge in the calendar."

Until supply increases substantially, munis should hold steady. "Muni demand is still significantly greater than supply so munis are not likely to fall out unless you get surge of supply. The demand is there, but the willingness to execute is waning due to uncertainty with the debt ceiling."

"The new issues this week have been well received and there was an uptick in trading volume as more participants engaged," wrote Dan Toboja, vice president at Ziegler Capital Markets. "Still a large portion of trades occurring are dealers taking inventory as roughly two-thirds of the trades were dealer buys or inter-dealer trading. Without firm going away orders the market will remain more volatile."

In the primary market Thursday, JPMorgan priced $170.5 million of Michigan Finance Authority state revolving fund revenue bonds, rated AAA by Standard & Poor's and Fitch Ratings.

Yields on the first series, $139.1 million of clean water revolving fund subordinate refunding bonds, ranged from 0.16% with a 2% coupon in 2013 to 2.30% with a 5% coupon in 2026. The bonds are callable at par in 2022.

Yield on the second series, $31.4 million of drinking water revolving fund subordinate refunding bonds, rated from 0.17% with a 1% coupon in 2013 to 2.30% with a 5% coupon in 2026. The bonds are callable at par in 2022.

In the competitive market, Santa Clara County, Calif., was expected to auction $490 million of general obligation bonds, but the deal was postponed. The county's finance director and financial advisor did not return calls seeking comment.

Citi won the bid for $215.8 million of Virginia Public Building Authority revenue bonds, rated Aa1 by Moody's Investors Service and AA-plus by Standard & Poor's and Fitch. Prices were not available by press time.

Municipal bond market reads showed steady to stronger trading Wednesday after losses on Tuesday.

Yields on the Municipal Market Data triple-A GO scale finished steady. The 10-year yield closed steady at 1.81% for the third session while the 30-year yield held flat at 2.86% for the second session. The two-year closed at 0.34% for the eighth session.

The Municipal Market Advisors 5% coupon triple-A benchmark scale also showed steady to lower yields. The 10-year yield held steady at 1.84% for the sixth consecutive trading session while the 30-year yield closed flat at 2.95% for the second time. The two-year closed unchanged at 0.35% for the eighth session.

Treasuries continued to post gains for the second trading session. The benchmark 10-year yield and the 30-year yield fell two basis points each to 1.95% and 3.16%, respectively. The two-year was steady at 0.26%.

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