The rally in the tax-exempt market started to slow a bit from the morning's big gains, though traders said the market was still stronger. Traders said bond prices are also being supported by recent poor economic news, and the possibility the Federal Reserve will taper less than what was originally thought.

"Munis are still rallying. It's slowed down a little since this morning but it's still rallying," a New York trading said. "Munis have a mind of their own. I'm getting decent enough bids that it's up."

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