The tax-exempt market has skidded into a new month, withyields rising slightly over the last two weeks. Particularly affectedhave been shorter maturity bonds, where individualinvestors have rebuffed too-low absolute yields, and lowerrated/risky sector bonds that have been hampered by worseningcredit fears and a setback in institutional risk taking. Still,there has been little sign of forced selling by large investors,and the Federal government's efforts to support both Citibankand AIG are positives for our sector. Further, PresidentObama's new budget proposal should underwrite more demandfor tax-exempt bonds by both raising marginal tax ratesand cutting the value of competing tax shelters like the mortgageinterest deduction. This puts the muni sector in a slightlybetter place to receive new sponsorship, especially becauserecent price concessions by sellers have made bonds throughthe 10yr more attractive. Still, this week, any positives maybreak against the largest new issue calendar so far this year,and a potential reinvigoration of flight-to-safety buying ofTreasuries could further dilute institutional demand for munis.