Municipal cash prices ended unchanged to slightly lower yesterday, as light bid lists dotted what was likely the last full session of a dismal year.

"It probably can't get worse in 1995," said James Kochan, head of fixed-income asset management at Robert W. Baird & Co. "If you survey the wreckage in the fixed-income arena in 1994, it's pretty ugly."

Traders yesterday said some odd pieces were out for bid, but not much of a bid side existed, given the holiday slowdown. While some tax swapping was noted, "it's just hard to do; there's not a lot of supply out there to do much of the swapping with," one trader said.

A municipal analyst said yields on high-grade issues were unchanged, while dollar bonds were down almost 1/8 point. Activity was generally light, but there was some retail action. Bid lists totaled about $50 million, he said.

In debt futures, the March municipal contract was down 6/32 to settle at 85 5/32. Yesterday's March MOB spread was negative 458, compared with negative 461 on Wednesday. In the government market, the 30-year bond closed down 2/32 to yield 7.83%. The Public Securities Association has recommended a 2 p.m. Eastern standard time close for the government market today.

Looking ahead, Kochan expects municipals will as usual grow slightly rich to Treasurys during January, after which they will begin to trade in line with the rest of the fixed-income market. Municipal investors typically have cash to reinvest in January, and new issues should remain scarce.

Kochan cautioned, however, that muni players shouldn't bank too much on January reinvestment this year, because some investors may be gun-shy from 1994 losses.

"I think [munis] will rally a little bit early in January, and then by the end of the quarter you'll have given it all back," he said. Kochan expects the economy to slow and bond yields to begin to decline during the second half, a phase during which municipals should lag taxables' improvement.

In 1995, "you have the prospect of competitive tax cut proposals from the Republicans and Democrats trying to outdo each other," he said.

The competition is unlikely to help the bond market, Kochan said.

"Basically it's regarded as irresponsible fiscal policy, and more often than not that's exactly what it is," Kochan said.

At this stage of the economic recovery, tax cuts are not needed because the economy is overheating, he said.

On the economic front yesterday, the index of leading economic indicators rose 0.3% in November, higher than the 0.1% gain analysts had expected. Yesterday's rise marked the biggest gain in three months, and followed October's 0.1% decline.

Kevin Flanagan, a vice president and financial economist at Dean Witter Reynolds Inc., said the report had "absolutely no effect on trading whatsoever."

Instead, Flanagan said the bond market is again looking to the foreign exchange markets for direction.

While the dollar turned in a fairly lackluster performance in New York trading yesterday, it attempted a rally in the preceding overnight session, which lifted bonds as well. When the dollar failed to sustain those levels, the bond faded in sympathy, he said.

"So they are moving pretty much in lockstep," he said.

Given the potential economic and inflationary pressures that still loom, the bond market had gotten ahead of itself, Flanagan said.

"I would not be surprised to see some yield-curve-re-steepening trades being put on the books as we enter the new year," he said.

The market began to pay less attention to the dollar when it appeared that the U.S. government was serious about defending the currency in November, a push that was followed by the Federal Reserve's 75-basis-point tightening of short-term interest rates, the economist said.

Lacking much else to trade off of this week, the bond market refocused on the dollar, Flanagan said.

Today, the market will focus on the Chicago Purchasing Managers report, the economist said. While the survey covers a limited region, its components -- such as prices paid, supplier deliveries, and new orders -- offer a glimpse of where the economy is headed. The Fed is known to pay attention to such reports, Flanagan said.

Turning to next week's negotiated action, the New Jersey Economic Development Authority is expected to bring a $25 million variable-rate offering, as well as a $44.9 million deal, both through Herbert J. Sims & Co.

The 30-day visible supply of municipal bonds yesterday totaled $1.18 billion, up $62 million from Wednesday. That comprises $727.4 million of competitive bonds, up $62 million from Wednesday, and $450 million of negotiated bonds, unchanged from Wednesday.

Standard & Poor's Corp.'s Blue List of municipal bonds was down $78.9 million yesterday, to $1.67 billion.

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