As interest rates rise, assets have begun steadily draining out of municipal bond funds. The best barometer of sinking demand, published by the Investment Company Institute (ICI) weekly, showed a net outflow of $34 billion from muni bond mutual funds from mid-April through mid-August.  You can access it here: 

In addition to about $540 billion held by long-term municipal bond mutual funds, muni closed-end funds (CEFs) hold more than $80 billion. Some of these CEFs soon may represent the best bargains in a down market – the equivalent of "municipal bonds on sale." 

As assets have flowed out of munis, a number of CEFs have moved from selling at premiums to steep discounts to net asset value. According to The Wall Street Journal, the average discount on all muni CEFs recently was 7.31 percent. Earlier in 2013, the average CEF sold at a premium of more than 3 percent.