Municipals gained 1/8 to 1/4 point Friday while the fickle 30-year Treasury bond rebounded from Thursday's sharp losses to finish 5/8 point higher.

The government market's big swings in recent days have players scared to make a commitment in municipals, traders said. In addition, vacations continue to thin municipal ranks and desks are staffed by junior people, one trader said.

"It is the last week of August, and guys are calling in from their cellular phones saying `stay hedged' and heading back to the beach," the trader said.

In moderate secondary activity Friday, dollar bonds ended 1/8 to 1/4 point higher, while yields on high-grade issues improved by two basis points.

The 30-year Treasury bond, which closed nearly a point higher on Wednesday following a successful note auction, sank almost a point on Thursday. On Friday, the long-bond, which had been up over a point during the day, ended 5/8 points higher to yield 7.47%.

Friday's gains came on a weaker-than-expected revised second quarter gross domestic product report and a stronger dollar. The dollar managed to break the 100 yen barrier Friday, standing at 100.40 Yen in late New York trading.

"Our technicians felt the [Treasury] market was poised to do better" on Thursday, a second municipal trader said. "Everyone was shocked when it tanked."

In debt futures, the September municipal contract closed up nearly 5/8s point at 90 29/32s. Friday's September MOB spread was negative 392 compared with negative 386 on Thursday.

On this week's negotiated calendar, a $225 million Denver airport system revenue bond offering is expected through Lehman Brothers.

"We are looking at it," said Sheila Amoroso, senior portfolio manager of the $193 million Franklin Colorado Tax-Free Income Fund. "We are still in the process of credit evaluation."

Franklin tends to be "very aggressive on the credit side," Amoroso said, adding the fund officials have visited the airport several times.

"We are going to be looking at it as if it's a brand new credit," she said. Credit aside, "it's got to be attractively priced" for Franklin to bite, she said.

Asked about an Associated Press report yesterday that a federal grand jury is investigating alleged wrongdoing at the airport, Amoroso replied, "It has not affected the way the bonds are trading at this point, and there have been rumblings about that."

Stephen Wolfe, portfolio manager of the $900 million T. Rowe Tax-Free High Yield Fund, said he also plans to look at the Denver airport bonds.

"We are coming to the end of our credit research on it," Wolfe said. "I'm not quite sure which way we are going to shake on it, but I think we are going to be serious lookers."

Wolfe's fund is seeks out the higher-yielding credits and Denver bonds are "the highest yielding thing out there right now, deservedly so," he said. The fund currently holds no Denver airport paper.

Asked about the grand jury investigation, Wolfe said that not enough has been disclosed at this point to determine the impact on the credit.

"I believe it's been ongoing [but] I don't know enough about it to say up or down," Wolfe said.

Mother buy sider, who asked to remain anonymous, said that while he'll be watching to see how the Denver deal goes, he doesn't see himself participating.

"I think if I looked at that probably my head analyst would leap out the window and I can't afford to lose her," he said.

The source said he believes the airport credit could improve somewhere down the line, but too much uncertainty exists now, and there is plenty of other Colorado paper out there.

Late Wednesday, Standard & Poor's Corp. affirmed its BB rating on the upcoming $225 million debt issue and the $3.2 billion in outstanding airport revenue bonds for Denver International Airport. The outlook remains developing at a time when the airport opening has been delayed four times since October because of a trouble-plagued, automated baggage system.

Standard & Poor's said the junk bond rating reflects ongoing difficulties with the baggage system that have made it impossible to predict costs. It also said uncertainties could lead to inadequate capacity for meeting timely debt service payments, although the airport bonds are not in danger of imminent default.

While Standard & Poor's said the recent agreement between United and the city to develop a back-up baggage system and modify the flawed automated backup system is positive, a final deal must be reached before the impact can be assessed. Other positive factors remain, including strong air traffic in the Denver market and strong airline interest in gates, the rating agency said last week.

Last Wednesday, Moody's Investors Service confirmed its conditional Ban rating for the upcoming airport issue and $3.2 billion of existing debt. A day earlier, Fitch Investors Service assigned a BBB-minus rating to the $225 million issue, and lowered the $3.2 billion outstanding parity bonds to BBB-minus from BBB.

"The entire $3.4 billion is on FitchAlert with negative implications, where it was placed May 3, 1994, until the new airport is open and fully operational," Fitch said in its release. "Several credit factors are negatively impacted by the constant postponement of the opening of the [Denver International Airport], including the escalation of costs to $3.215 billion."

On the other hand, "certain credit fundamentals remain solid, including the large and considerable economic base of the Denver area for origination and destination ... traffic. Denver's location near the center of the U.S. makes it a natural juncture for eastwest hubbing."

In other news on Friday, the 30-day visible supply of municipal bonds totaled $2.28 billion, down $174.9 million from Thursday. That comprises $1.13 billion of competitive bonds, down $197.3 million from Thursday, and $1.53 billion of negotiated bonds, up $22.4 million from Thursday.

Standard & Poor's Blue List of municipal bonds rose $43 million Friday to $1.785 billion.

Janin Friend contributed to this column.

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