PPI offers boost to battered market, not enough to send prices soaring.

Municipal's ended unchanged to up 1/4 yesterday as a Goldman, Sachs & Co. group won $400 million New Jersey Transportation and Trust Fund Authority revenue bonds.

One trader characterized yesterday's cash market as unchanged at best.

"No one's a buyer," he said, "People are selling and they're selling things that nobody cares about."

He cited lower quality credits and discount bonds as examples of unpopular paper.

Yesterday was yet another example of participants looking an uptick in the market as an opportunity to sell, the trader said. "Your getting a fair amount of people trying to push paper out," he said.

"It really didn't change," another trader agreed, adding "There were some cheap trades today."

A municipal analyst, however, had dollar bonds closing up 1/4 point or more in spots. Dollars had been up 3/8 point at noon, but later faded, he said. Yields on high-grade bonds fell three basis points, he said. Activity was light to moderate.

In the debt futures market, the June municipal contract closed up 7/32 to 89 11/32. Yesterday's June MOB spread was negative 416, up from negative 414 yesterday.

As for governments, the 30-year bond closed up more than 1/4 of a point 7.55%. Treasuries derived strength from the Labor Department's report that the producer price index fell 0.1% in April, confounding forecasts calling for a 0.2% increase. Excluding food and energy, the PPI gained 0.1%.

Today, the market receives the consumer price index. Economists surveyed by The Bond Buyer generally expect a 0.2% increase in both the overall and core rate.

On the competitive front, a Goldman Sachs group won the $400 million New Jersey revenue transportation system bonds with a true interest cost of 5.401%.

The noncallable bonds, were reoffered to investors at yields ranging from 3.75% in 1995 to 5.60% in 2003. The 1999 and 2000 maturities are AMBAC insured.

Moody's Investors Service rates the uninsured portion AA, while Standard & Poor's Corp. rates it A-plus.

A syndicate source said the 1996 maturity was all sold, while strong investor interest was also seen in the 2001, 2002, and 2003 maturities as well as the insured maturities. At 4:30 p.m., eastern daylight time, some $172 million of the offering remained.

"We're happy to report that the deal is over half sold in light of the fact that its in a tough part of the curve and it's been a volatile day," he said.

In the negotiated sector, J. P. Morgan Securities was sole manager on Humphreys County, Tenn., Industrial Development Board's $70 million of solid waste disposal facility bonds (E.I. Du Pont De Nemours and Company Project) Series 1994.

The offering, subject to the alternative minimum tax, consisted of a single maturity, 2024, which was priced at par to yield 6.70%. The offering was not repriced. It is callable beginning May 1, 2004 at 102, declining to par in 2006.

"They wanted to lock in long-term fixed-rate debt," a source familiar with the offering said, adding, "It was well received by a variety of institutional investors."

In other news yesterday, Jerry Webman, a managing director and chief investment strategist for non-taxable fixed income funds at Prudential Securities, said the municipal market continues to look strong from a technical stand point. Webman's comments came during a portfolio manager's roundtable sponsored by Prudential Securities.

With refunding down, new issue volume this year is likely to be roughly half to 65% of the 1993 tally, he said. A record amount of financing was done last year, totaling $337.14 billion of tax-exempt bonds and notes. Long-term municipal volume totaled $290.95 billion.

April of this year marked the thinest new issue month since 1990, Webman said. "It's just like orange juice when there's a freeze in the groves," he said.

While redemptions have occurred, they have not happened in the numbers mutual fund portfolio managers had feared, he said. "There's a lot of cash on the sidelines," he said.

Webman also noted that municipals are currently trading at attractive levels relative to Treasuries.

"That for most taxpayers is pretty much kind of a gift if you buy the right bonds," he said.

The strategist noted that following a big year in 1993 when nearly $300 billion of new municipal bonds were sold, tax exempt supply dwindled in late 1993 and early 1994 as higher rates discouraged refundings.

The Federal Reserve's Feb. 4 monetary policy dredged up memories of the municipal market's April 1987 troubles, and triggered a secondary market sell off, he said.

After the selloff and with supply shrinking, "That tells me that the market wants to rally but it's been held back by two different technical factors," Webman said.

At least some market volatility is attributable to funds having a lot of cash to put to work, and their uncertainty over when to buy. While they fear getting hit by higher interest rates, portfolio managers are also afraid they may miss an opportunity, and the market will move away from them.

Dennis Bushe, a managing director and chief investment strategist for the fixed income group at Prudential Securities, who also spoke at the roundtable, added: "There's so much cash on the sidelines, I think that when sentiment changes it's going to change very fast."

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