Continued weakness has permeated through the municipal market over the past two weeks, leading to the second prolonged disengagement of tax-exempts from the Treasury market in the past seven months - and a dramatic rise of The Bond Buyer's weekly yield indexes.

"The bid side is extremely weak. Munis are getting extremely cheap here, and I think it's for a number of reasons," said Gary Strumeyer, managing director at BNY Capital Markets. "I think you're seeing an increased supply of bonds overall as auction-rate securities get refinanced longer term. And I think there's definitely a distraction factor, where I think a lot of firms are focusing on their auction-rate markets and it's really a distraction."

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