The municipal market was quiet but slightly firmer Friday, as the extensive tax-exempt rally seen the past several sessions lost steam and buyers retreated to the sidelines in advance of the looming holidays.

"Yesterday was a madhouse. Every time I hung up the phone, it rang again. Today, you can hear crickets," a trader in New York said. "There's a few things on the long end trading okay, but for the most part it's very quiet. It feels like everyone's on holiday already. Yesterday, it was like a food fight over the same stale bonds, and it was getting real nasty. Things were trading through the scale that shouldn't have been."

"There's definitely a firmer tone still, though," the trader said. "If you buy something today, you might get it slightly cheaper just as a gift or something. But at the end of the day, nobody's really trying to cut anything, that's for sure. I'd say we're one or two basis points better today, for the sake of conversation, but overall, it was marked up so much yesterday that there's not much more room for you to go today."

Trades reported by the Municipal Securities Rulemaking Board Friday showed gains. A dealer sold to a customer Chicago 5.25s of 2037 at 5.76%, down three basis points from where they traded Thursday. Bonds from an interdealer trade of New York City 5.625s of 2031 yielded 5.85%, two basis points lower than where they were sold Thursday. Bonds from an interdealer trade of insured Florida State Board of Education 5s of 2034 yielded 5.90%, down two basis points from where they traded Thursday. Bonds from an interdealer trade of insured Puerto Rico Public Finance Corp. 5.125s of 2024 yielded 5.23%, three basis points lower than where they were sold Thursday.

"It's been a pretty wild week, and there are more gains today, but it's quieted down for the most part," a trader in Los Angeles said. "We're probably better two or three basis points on the whole, but it's a much quieter atmosphere out there than it's been in recent days."

The Treasury market showed losses Friday. The yield on the benchmark 10-year Treasury note, which opened at 2.07%, was quoted near the end of the session at 2.11%. The yield on the two-year note was quoted near the end of the session at 0.73%, after opening at 0.68%. And the yield on the 30-year bond, which opened at 2.52%, was quoted near the end of the session at 2.55%.

Activity in the new-issue market was light Friday.

The economic calendar was light Friday. However, this week, a slate of economic data will be released ahead of the Christmas holiday. Tomorrow, the final third-quarter gross domestic product will be released, alongside the final December University of Michigan consumer sentiment index, November existing home sales, and November new home sales. On Wednesday, initial jobless claims for the week ended Dec. 13 will be released, along with continuing jobless claims for the week ended Dec. 7, November personal income, November personal consumption, the core personal consumption expenditures deflator for November, and the November durable goods report.

Economists polled by Thomson Reuters are predicting a 0.5% drop in GDP, a 58.6 reading for the Michigan sentiment index, 4.900 million existing home sales, 420,000 new home sales, 558,000 initial jobless claims, 4.400 million continuing jobless claims, no change in personal income, a 0.7% dip in personal consumption, no change to the core PCE deflator, a 3.0% decline in durable goods, and a 3.0% drop in durable goods excluding transportation.

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