Action was light ahead of the Christmas holiday yesterday, but municipals outperformed Treasuries in both the cash and debt futures market.

Tax-exempt bonds were firmer Friday and the positive tone spilled over into yesterday's session, traders said. The market opened quietly, but broke away from the government market, which suffered at the hands of Fed tightening rumors and higher commodities prices. Traders said municipals were beginning to enjoy the prospect of lower supply in early January coupled with greater demand. Buyers will probably have cash on hand from January redemptions and various payments, market players said.

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