The municipal market was weaker yesterday, following Treasuries. Traders said tax-exempt yields were lower by about three basis points.

"The market is still struggling with the issue" of Financial Security Assurance Inc. and Ambac Assurance Corp. being placed on negative watch by Moody's Investors Service late Monday, a trader in Chicago said. "Like a sports figure or politician, it's now 'guilty until proven innocent' instead of 'innocent until proven guilty.' "

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