The tax-exempt market headed lower Wednesday morning as price discovery remained difficult in an illiquid market.

One trader focused on the high-yield market said he's seen bonds as much as five to 10 points off. "It's a liquidity thing and capital flows are all over the place," the Rhode Island trader said. "When people open up their statements this week it will show the values of mutual funds and individual bond holdings and they are going to be surprised because for an awfully long the time the number went up and here's a change to see a reverse."

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