Jessica Lerner

"Demand is firming up. Interest rates have moved off the recent highs. Intermediate muni yields are about 50 basis points off from those highs," said Stephen Shutz, head of tax-exempt fixed income and a portfolio manager at Brown Advisory.

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"Everyone is reevaluating and taking a breather after the numbers [on Tuesday]," a New York trader said.

Munis yields fell nine to 12 basis points, depending on the curve, but underperformed larger gains along the UST curve. Large new-issues began pricing.

November "continues to be off to a strong start as yields have fallen an average of 34 basis points across the curve since the start of the month," said Jason Wong, vice president of municipals at AmeriVet Securities.

"As with most fast rallies there are sessions when the market pauses to assess where fair value should play out," said Kim Olsan, senior vice president of municipal bond trading at FHN Financial.

Outflows slowed from muni mutual funds with LSEG Lipper reporting investors pulled $151.1 million for the week ending Wednesday while high-yield saw inflows of $190 million.

A constructive trading session in the secondary aided a busy primary once again as investors appear to be more engaged in the asset class.

California and Washington sold four large refunding GO deals in the competitive market while several deals of size priced in the negotiated market led by a $650 million for Arizona's Salt River Project. A constructive secondary led yields to fall three to five basis points.

The recent rally is good news for munis, which have "posted a total-negative return loss for three straight months," said Jason Wong, vice president of municipals at AmeriVet Securities.

While it's been a tough year across fixed-income generally, a Wall Street muni retrenchment marks an opportunity for regional and middle-market firms to gain more of a foothold, market participants said.

Friday's employment report was good news for the Federal Reserve, with fewer jobs created and a smaller rise in earnings, leading analysts to cautiously increase expectations that the hiking cycle is over.

"The lack of standardization is a very real problem that impacts all facets," said Ted Chapman, managing director and investment banker at Hilltop Securities.

Triple-A muni yields fell 10 to 14 basis points while UST saw gains of up to 16bps out long as market participants consider a potential end to Fed rate hikes.

"The big question is: who's next? I don't think UBS is the end," said a veteran sellside market participant.

Municipals closed out October in the red, the third consecutive month of losses for the asset class.

While the FOMC statement will likely have very few changes, the post-minutes release press conference will be the wildcard.

October's total volume rose 29.3% to $37.156 billion in 661 issues from $28.738 billion in 614 issues a year earlier. New-money grew more than 30% while refundings were up by nearly 75%.

Another month of muni losses "may spark additional sale pressure as some investors throw in the towel, but we suspect any further weakness would represent a strong entry point for [investment grade] buyers," Birch Creek Capital said in a weekly report.

If Treasury rates become "more stabilized," it provides "a good reason to be somewhat constructive on munis for a while," BofA Global Research said in a report.