The municipal bond market underperformed Treasuries Friday afternoon as yields didn't fall as much as their taxable counterparts on a risk-off trade.

"It looks like munis are underperforming on light activity on a quiet Friday," a Virginia trader said, adding that munis could play catch up Monday and Tuesday. "Supply next week looks like things should stack up favorably for munis. If you take out the big Iowa Finance Authority fertilizer deal, it's very manageable supply and is constructive for the market."

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