In the new year, however, tax-exempt yields are expected to fall back.

Since the beginning of the year, tax-exempt yields have fallen about a quarter of a percentage point.

The steep drop in tax-exempt yields followed a slight rise in the previous week.

It is now in about 20 different closed-end municipal bond funds, which have a tax-exempt yield of around 6.5 percent, he said.

The demand for shorter paper has pushed tax-exempt yields to below 5 percent for the first time since August 1988.

The tax-exempt yields fell for the second straight week.

This will make the tax-exempt yield from municipal bonds even more attractive.

After declining for three consecutive weeks, tax-exempt yields moved up, as assets slipped by $159 million, to a total of $98 billion.

Analysts attributed a large part of the gain to recent increases in tax-exempt yields, which are up 14 basis points over the previous month.

The sharp decline in tax-exempt yields was more technical.