Prices off by 1/8 in light trading as market awaits 3rd quarter GDP.

Municipal bond prices slipped 1/8 point or more yesterday as players dug in ahead of today's report on thirdquarter gross domestic product.

There was some buying on the long end of the market, in what one trader described as a "little bit of bottom fishing," but the market overall was fairly inactive, he said.

"Prices were probably down a little bit because of the volume of bid lists, but not down that much," said another trader, who estimated that there were 25 bid lists out yesterday. In light secondary trading yesterday, dollar" bond prices slipped 1/8 point, while yields on high-grade issues rose two basis points overall.

On the government side, the 30-year Treasury bond was up 6/32 to yield 8.04%. In debt futures, the December municipal contract closed down 1/8 point to settle at 84 27/32.

Yesterday's December MOB spread was negative 401, compared with negative 393 on Wednesday.

James Kochan, head of fixed-income asset management at Robert W. Baird & Co., said the market is braced for today's GDP report and what it might suggest as far as further Fed tightening.

"If the number comes in at around 3% growth and we don't get any Fed response, the market is going to take that somewhat negatively," Kochan said. The analyst added, however, that the market is braced for bad news, and has backed up significantly already.

"So I don't think the market gets hit terribly, unless it's just an incredibly strong number," he said.

But if GDP rises by 3%, and the Fed moves the funds rate up, "I think the market would take heart from that," Kochan said.

Kochan also noted that municipals have been getter cheaper relative to Treasuries of late, weighed down both by a recognition that tax-exempts had been getting expensive and by heavy bid list volume. In addition to their own troubles, municipals share in overall negative sentiment vexing the credit markets.

Kochan sees "a very discouraged investor universe, and when you get bid lists or get supply in a marketplace like this, it weighs heavy on the market."

One thing the municipal market has going in its favor is the lack of significant new supply usually seen in October to late November.

"We're not getting that," Kochan said. "So overall, I think munis will be okay, [though] they may have to cheapen up a little bit more relative to Treasuries."

In competitive action yesterday, Goldman, Sachs & Co. won $150 million of New Jersey Housing and Mortgage Finance Agency home buyer revenue bonds with a true interest cost of 6.77925%.

The MBIA-insured offering contained $64 million of Series L bonds, which are not subject to the alternative minimum tax, and $86 million of Series M bonds, which are subject to the tax.

The Series L bonds feature a top yield of 6.70% in 2016. The Series M bonds offer a top yield of 7% in 2026.

Merrill Lynch & Co. had the cover bid with a TIC of 6.81791%. The last of the three bidders was Prudential Securities Inc., with a 6.89365% TIC.

Turning to next week, the negotiated sector features three deals so far topping $100 million. A $187 million New York State Medical Care Facilities Finance Agency offering, led by Goldman Sachs, is expected to be priced on Tuesday. The deal is FHAinsured.

On Thursday, the State of Nevada Colorado River Commission is expected to sell $160 million of general obligation limited tax revenue-supported bonds through Merrill Lynch. Also next week, a $141 million Tampa, Fla., Convention Center Hotel Corp. project revenue bond offering is expected through Smith Barney Inc.

The competitive front next week also features at least three offerings at or exceeding the $100 million mark. Leading the pack is a $160 million Ohio Public Facilities Commission offering on Tuesday. On Wednesday, Nassau County, N.Y., is slated to offer $105 million of general obligation bonds, while the Metropolitan Atlanta Rapid Transit Authority is expected to sell $100 million of revenue bonds.

On Monday, the East Bay Municipal Utility District, Calif., is expected offer $80 million of revenue bonds. On Tuesday, the Delaware Transportation Authority is expected to sell $70 million of revenue bonds.

The 30-day visible supply of municipal bonds yesterday totaled $2.77 billion, down $350.2 million from Wednesday. That comprises $1.520 billion of competitive bonds, up $21.8 million from Wednesday, and $1.254 billion of negotiated bonds, down $372 million from Wednesday.

Standard & Poor's Corp.'s Blue List of municipal bonds was down $31 million yesterday to $2.166 billion.

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