Municipal bonds ended 1/4 point lower overall yesterday as players awaited key inflation figures arriving today and tomorrow.

"It's down, it's cheaper," one seasoned municipal trader said, pointing a finger toward "August, boredom, vacations," and a lower government market. While government securities traded lower for most of the day they managed to close just inside positive territory.

The trader also cited some institutional selling of the municipal contract early in the day.

"They put a lot of contracts in the Street early on, so that set the tone." he said

Selling was also noted in the cash market yesterday, with traders citing customer lists totaling from $200 million to $250 million or more. One trader attributed the selling to bearish sentiment rather than redemptions.

"I think guys are getting bearish and are just raising their cash levels," he said. With today's PPI report, tomorrow's CPI report, and the uncertainty regarding the much said, "I think people, some customers, are positioning themselves, cash wise, into a bearish scenario right now."

In a light to moderately active session yesterday, yields on high-grade issues rose by three basis points through the intermediate range. Dollar bonds prices ended 1/8 to 1/4 point lower.

In debt futures, the September municipal contract settled down nearly 1/8 point at 90 15/32. Yesterday's September MOB spread was negative 397, compared with negative 394 on Tuesday.

"Futures were down pretty good, but they bounced back," a trader said.

In competitive action yesterday, Goldman, Sachs & Co. won $185 million of Connecticut general obligation bonds with a true interest cost of 5.66%

The offering consisted of serial bonds reoffered to yield from 4.20% in 1996 to 5.95% in 2010. A 2012 term, containing $25 million, returned 6.05%.

First Chicago had the cover bid with a TIC of 5.6845%, followed by Smith Barney at 5.6897%, J.P. Morgan at 5.6978%, and Prudential Securities at 5.7202%.

"The bids were highly competitive and we are pleased with the rate in today's market," Connecticut Treasurer Joseph M. Suggs Jr. said through a spokeswoman yesterday. Suggs also cited the "high level of interest in this sale, which was evident by bids from five firms."

Richard J. Moynihan, president of Dreyfus Municipal Funds, thought yesterday's Connecticut offering was priced fairly, but he said he passed on it because it offered too little yield.

Moynihan said he might have picked up some of yesterday's offering to keep on hand for trading purposes -- but only "in a different day and age, when cash was flowing into the funds like honey." Nowadays, he said the yield is too low to fit his portfolio needs.

"It's because these days we don't have so much money to plow into it," Moynihan said. "We've got to get more bang for the buck."

The Dreyfus Premier Connecticut Municipal Bond Fund totals roughly $358 million, he said. Moynihan added that while the fund is not seeing inflows, it's not seeing redemptions either.

In the short-term market yesterday, New York City sold $2.2 billion of notes.

"The sale went fine," said Patrice Mitchell, the city's deputy comptroller for finance. "We were very pleased."

Mitchell cited a high level of Street interest in the deal, adding that the city received a total of nearly 100 bids for the three series of bonds composing the offering.

On the $750 million of Series A tax anticipation notes, the city accepted eight winning bids ranging from 3.3006% to 3.4112%. On the $650 million of Series A revenue anticipation notes, the city accepted seven winning bids ranging from 3.5189% to 3.6103%. On the $800 million Series B revenue anticipation notes, the city accepted 10 winning bids ranging from 3.7894% to 3.9156%. Of the $800 million Series B notes, $500 million were sold as floating-rate notes with the city using a swap to lock in a fixed rate.

Elsewhere, Goldman, Sachs & Co. negotiated the purchase of $63.1 million of taxable Affordable Housing Program Trust Fund Bonds for the Illinois Housing Development Authority. The true interest cost to the authority was 8.505%.

Pamela Lenane, the authority's acting director, said the bonds were bought by retail investors, a money market fund, life insurance companies, and banks.

"We were pleased there was a broad response to our bonds," Lenane said. The bonds, insured by AMBAC Indemnity Corp., are rated triple-A by Moody's and Standard & Poor's.

The deal was structured to use state funds as well as loan repayments for debt service. The state money comes from Illinois' Affordable Housing Trust Fund, which is funded by a real estate transfer tax. The deal also included a 12 year prohibition on bond calls due to loan prepayments and a 10 year call prohibition due to surplus funds. Goldman Sachs estimated that those redemption provisions saved the deal about 10 basis points.

Proceeds from the issue will finance 1,363 low and moderateincome multifamily housing units in Chicago and around the state. The bonds were sold on a taxable basis to maximize tax credits for developers.

The housing authority plans to issue a total of $200 million to $250 million of the trust fund bonds over the next two to three years, according to Lenane.

CS First Boston and Bear Stearus were co-managers on the deal.

In other news yesterday, the 30-day visible supply of municipal bonds totaled $3.95 billion, up $340;1 million from Tuesday, That comprises $2.77 billion of competitive bonds, up $302.1 million from Tuesday, and $1.179 billion of negotiated bonds, up $38.1 million from Tuesday.

Standard & Poor's Blue List of municipal bonds is up $25.2 million yesterday to $1.845 billion.

Karen Pierog contributed to this column.

Municipal Bond Index Update

The list of bonds priced for the Municipal Bond Index will be revised after the August 15 pricing.

Recent issues that qualify for inclusion in the index are:

Florida State Board of Education, public eduation capital outlay bends, Series 94A; 6.10s dated 8/1/94, due 6/1/24; first coupon 12/1/94; term amount: $76A00,000; callable 6/1/04 at 101,6/1/05 at par; ratings: Aa/AA; conversion factor: 0.8685; CUSIP: 341421YK5.

New York State Thruway Authority, highway & bridge trust fund revenue bonds, Series 94A; 6s dated 8/1/94, due 4/1/14; first coupon 4/1/95; term amount: $51,455,000; callable 4/1/04 at 102, 4/1/06 at par; ratings: A/A minus; conversion factor: 0.8514; CUSIP: 649876KX6.

Sacramento Municipal Utility District, Calif., electric revenue bonds, Series 941; as dated 8/1/94, due 1/1/24; first coupon 1/1/95; term amount: $60,745,000; callable 1/1/04 at 102, 1/1/06 at par; ratings: Aaa/AAA; conversion factor: 0.8533; CUSIP: 786004500.

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