Fading Treasuries drove the municipal bond market down Tuesday morning as traders said the market opened much lower even after Monday's selloff.

"It feels weak out there," a Chicago trader said. "We've had several days of controlled selling and today it seems like people are waking up and deciding the 30-year muni being 2%-something is not coming back too soon. There are a lot of bonds out for the bid. Thankfully Treasuries are stabilizing a little but the market opened pretty scary."

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