Municipals ended a quiet Friday unchanged as players looked toward tomorrow, when the Federal Reserve is widely expected to tighten the nation's monetary belt another notch or two.

"It's just kind of sitting there," one trader said of the market.

Further quieting the session was the Municipal Bond Club of New York's annual outing held at the Westchester Country Club in Rye, N.Y.

"~Unched' is a good word for it," said another trader, who also sounded a cautious note. "There are a lot of danger signs out there," he said. "The market just can't seem to get up to the next level."

Those danger signs include a building Standard & Poor's Blue List, and healthy, if not robust, new supply.

The Blue List surged by $157 million on Friday, to $1.96 billion from $1.8 billion on Thursday. The measure of dealer inventories hasn't been that high since March 31, when it was $2.03 billion.

In light secondary activity Friday, both high-grades and dollar bonds finished unchanged.

Dollar bonds opened 1/8 point higher, dropped 1/8 at midday, and came back the same amount during the afternoon to finish even. The bonds were simply following Treasuries, one analyst said.

In the debt futures market, the June municipal contract closed up nearly 3/4 point higher to 90 2/32. Friday's June MOB spread was negative 419, up from negative 416 Thursday.

In the government market, the 30-year bond closed 5/8 point higher to yield 7.49%, gaining support from yesterday's consumer price index report.

The Labor Department reported that consumer prices rose 0.1% in April. Excluding food and energy, prices rose 0.2%.

Those numbers came in under most economists' average estimates, which generally called for a 0.2% to 0.3% gain in the CPI both with and without food and energy prices.

Thursday's producer price index was also favorable for bonds. The index showed a 0.1% decline instead of the 0.2% increase economists had expected. Core PPI, which excludes food and energy, gained 0.1%.

One trader surveyed Friday said that while he believes the Federal Reserve will tighten monetary policy at its Federal Open Market Committee meeting Tuesday, "the $64,000 question is just how much."

"I'd like to see them move the discount rate 50 basis points, and I'd be in the 25 [basis] point camp on the fed funds [rate]," another trader said.

He also said the Fed needs to take a more active stance in the inflation fight.

"They have not been in front of the market. They have reacted to market movements," he said.

Considering the favorable inflation news brought by last week's PPI and CPI reports, the market would probably be in much better shape had the Fed made a move two weeks ago, he said.

James Kochan, head of fixed-income asset management at Robert W. Baird & Co., said if the Fed fails to act, it will likely trigger a "violent" sell-off reminiscent of the one the bond market saw May 6, when the central bank didn't tighten after a strong April nonfarm jobs report.

Kochan said the Fed must act on Tuesday to re-establish its credibility in the market and prove it is serious about fighting inflation.

On the negotiated new issue front this week, a Goldman, Sachs & Co. group will bring a $265,000 Valdez, Alaska, variable-rate marine terminal revenue refunding deal, while a CS First Boston group will bring $105 million Illinois Housing Development Authority multifamily housing revenue bonds.

The competitive side will see a $120 million Maryland deal, and $100 million issues from both Nevada and the New Jersey Economic Development Authority.

Total long-term, sales last week rose to $3.97 billion, up from $2.11 billion for the week ended May 6. That was the highest weekly sales volume since the week ended March 25 when $4.05 billion was sold.

The sales totals comprise $2.54 billion in negotiated deals while competitively bid issues were $1.43 billion.

The anticipated sales figure for this week, however, is only $2.86 billion.

The 30-day visible supply of municipal bonds today totaled $3,916.7 million, down $22.2 million from Friday. That comprises $1,659.6 million of competitive bonds, which is up $113.6 million from Friday, and $2,257.1 million of negotiated bonds, which is down $135.8 million from Friday.

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