The tax-exempt market continued to head lower Friday afternoon as the benchmark 10-year Treasury yield broke through 2.85%.

"The 10-year is off nine basis points today so the softness is coming from the Treasury market," a Virginia trader said. "Munis are probably holding in a little better than Treasuries because it's a quiet summer Friday, but we could see some catch-up on Monday after a big selloff Friday in Treasuries."

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