NEW YORK – The tax-exempt market was preparing for next week’s hefty supply after crumbling under pressure from this week’s deals. Munis weakened across the curve this week, and some traders noted additional supply next week wasn’t helping.

“Munis are definitely sloppy and there is a lot of chatter about a few big deals next week,” a New York trader said. “Only the first few years on the curve are hanging in.”

He added that the market is pretty cheap right now after the sell-off this week. “If the market can get through this supply I wouldn't be surprised if we snapped back a week from now.”

The Municipal Market Data scale was not updated by press time. On Thursday, the 10-year yield jumped five basis points to 1.90% while the 30-year yield spiked up three basis points to 3.19%. The two-year was steady at 0.32% for the fifth consecutive trading session.

After rising 15 basis points so far this week, the 10-year yield now remains 23 basis points above its record low of 1.67% set Jan 18. The 30-year yield finished 15 basis points off its record low of 3.04% set on Friday.

Treasuries pared losses over the past two trading session and yields plummeted. The benchmark 10-year yield dropped seven basis points to 1.58% while the 30-year yield slid eight basis points to 2.68%. The two-year was steady at 0.28%.

In economic news, the U.S. international trade deficit was $50.1 billion in April, down 4.9% from the revised March deficit of $52.6 billion. The April deficit was higher than the $49.5 billion deficit that economists had estimated.

“Through the month-to-month volatility, import growth has been soft this year rising only about 1% at an annual rate since December as weakness in industrial supplies and vehicle imports offset strength in imports of capital goods,” wrote economists at RDQ Economics. “By region, export growth to Japan, China and South American countries picked up in April, but the impact of the debt crisis in Europe is seen in this report with exports to that region almost 5% below year-ago levels.”

“From a second-quarter GDP accounting perspective, despite the narrowing in April the real trade gap is still wider than the first-quarter average putting trade on track to subtract about one quarter percentage point from real GDP growth in the second quarter,” they added.

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