The muni market continues to hammer away at long-term tax-free bonds as dealers wonder whether there is sufficient capacity to absorb an onslaught of new paper.

Triple-A rated tax-free bonds with maturities 25 years or more weakened by three basis points Friday, according to the Municipal Market Data scale, with the 30-year yield ticking up to 3.93% — the highest since August. Maturities of 15 years or less were unchanged, according to the MMD scale.

The tax-exempt market rallied briefly on Thursday on the heels of the Federal Reserve's quantitative easing announcement. The jolt was short-lived.

A report from the Bureau of Labor Statistics showing the economy added 151,000 jobs in October sent Treasury yields spiraling back up Friday. The 10-year Treasury yield rose three basis points to 2.52%, and the 30-year weakened seven basis points to 4.11%. Munis followed.

"Today we've seen munis take their cue from the Treasury market," said James Ahn, a portfolio manager for JPMorgan Funds. "The tone was decidedly weak, with many traders opting to lower their prices on their inventory items."

The back-up in Treasury yields helped push the specter of more than $10 billion in muni supply coming next week back into the market's consciousness Friday.

A trader in Los Angeles noted some dealers stuck with unsold balances from deals last week. With the Build America Bonds program set to expire at the end of this year absent an extension, long-term tax-exempt supply will likely pick up next year. The trader said people are pondering how long they want to hold on to positions given the looming supply.

"There's a feeling out there that with the potential that BABs may not get extended, that there'll be an awful lot of supply coming," the trader said. "That's made people a little bit more worried and a little bit more reticent."

"There's a lot of people who wouldn't mind selling bonds," said a trader in New York. "I'm one of them."

The BABs program has been a valve diverting billions of dollars a month in municipal borrowing into the taxable market. Market participants are wondering what the tax-exempt market would look like if all that came as tax-free debt.

The Massachusetts Development Finance Agency next week is bringing to market a $741 million tax-exempt bond for Harvard University. More than half of it is scheduled to mature in 30 years.

Thomson Reuters analyst Randy Smolik in his daily commentary said traders are already anticipating the issuer will have to concede on rates, and are dumping long-term paper in advance.

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