Retail investors reappeared in the tax-exempt arena yesterday, pushing prices up 1/8 to 1/4 point as trading activity increased and a luster returned to the market.

The credit markets weathered several sessions marked by uncertainty as the value of the dollar wavered, surprising economic reports rolled out of Washington, D.C., and shock waves were left from the presidential race.

Uncertainty remained early in the session yesterday as market players hesitated ahead of Federal Reserve Board Chairman Alan Greenspan's report to the Senate Banking Committee on the state of the economy.

But the annual Humphrey-Hawkins testimony yielded little news and buyers re-entered the tax-exempt sector and prices improved in moderate trading.

"We were dead in the water and then we had a spurt of activity - there were bonds moving out there compared to recent days," one trader said. "There still seems to be money to spend out there, and the bigger the block you have the better off you are."

Dollar bonds were quoted 1/8 to 1/4 point higher and as much as 3/8 point in spots, traders said. However, high-grade bond prices were stronger, and yields, through 15 years, were five to as much as 10 basis points lower.

In the debt futures market, the September municipal contract settled up 5/32 to 98.04. The MOB spread narrowed to negative 137 from negative 142 Monday as tax exempts outpaced Treasuries.

But, despite the positive tone, several traders said that an air of uncertainly remains about near-term price prospects.

"It's a tough market because everybody is nervous, wondering when we're going to get a correction." one trader said. "You can step up and buy bonds, but you're always looking for over your shoulder.

Sizable New Deals

Thin supply and strong demand from buyers laden with cash, primarily from massive July 1 bond calls, continues to allow underwriters to price new deals aggressively. In new-issue activity yesterday, yields were lowered in general as buyers were willing to take on bonds at even higher prices.

Dominating negotiated pricing action, a 12-member syndicate led by Merrill Lynch & Co. as senior manager priced and repriced $372 million of New York general obligation refunding bonds.

At the repricing, yields were lowered by as much as 10 basis points on the short end and five basis points for the longest bonds.

A Merrill Lynch officer said that managed bond funds took securities on the long end, trust departments and investment advisers bought bonds in the first four years of the loan, while premium bonds went to cash-flow buyers, including property and casualty companies.

The final reoffering scale included serial bonds priced to yield from 3% in 1993 to 6.15% in 2015. Bonds due in 1997 through 2002 were reoffered to investors at a premium, with coupons ranging from 6.50% in 1997 to 7% in 2002, and priced to yield from 4.90% in 1997 to 5.75% in 2002.

The issue is rated A by Moody's Investors Service and A-minus by Standard & Poor's Corp.

In other action, a syndicate led by First Boston Corp. priced and repriced $96 million of Memphis-Shelby County Airport Authority special facilities revenue bonds to lower the reoffering yield 12 basis points.

The offering included a 2012 term maturity priced at par as 6 3/4s.

The issue is rated Baa3 by Moody's and BBB by Standard & Poor's.

In light action in the competitive sector, $51 million of Colorado Metro wastewater reclamation district revenue sewer refunding bonds was won by a First Boston group, with a true interest cost 5.916%. The firm reported an unsold balance of $35 million.

Serial bonds were priced to yield from 2.75% in 1993 to 5.85% in 2006. A 2010 term was priced to yield 6.046% and a 2014 term was priced to yield 6.125%. The bonds are rated A by Moody's and AA by Standard & Poor's.

Secondary Market

Activity picked up in the secondary, although supply remains thin. The Blue List, sometimes used as an approximate measure of dealer holdings, totaled a mere $1.1 billion yesterday. Soon after the Humphrey-Hawkins testimony, traders said that a moderate amount of bid-wanted hit the Street with some larger blocks of bonds changing hands at up levels.

In secondary dollar bond trading, Colorado Springs 6 1/8s of 2020 were quoted at 99 1/8-lock to yield approximately 6.19% on the bid side. New York City Water Authority AMBAC 6.20s of 2021 were quoted at 100 1/4-1/2 to yield 6.18%, Texas Municipal Power Authority MBIA 5 3/4s of 2012 were quoted at 95 1/2-3/4 to yield 6.14%, and Salt River, Ariz., 5 3/4s of 2019 were quoted at 94-3/8 to yield 6.21%. South Carolina Public Power Authority 5 3/4s of 2021 were quoted at 94 7/8-95 1/4 to yield 6.13%.

In short-term note trading, yields on actively traded securities fell about two to five basis points, traders said.

In late action, Los Angeles tax and revenue anticipation notes were quoted at 2.92% bid, 2.90% offered, New York City tax anticipation notes were quoted at 2.82% bid, 2.78% offered, and Wisconsin notes were quoted at 2.97% bid, 2.95% offered. New York State Trans were quoted at 2.89% bid, 2.85% offered in late trading.

Negotiated Pricings

PaineWebber Inc. priced $55 million of Vermont Housing Finance Agency single-family housing bonds.

Serial bonds were priced at par to yield from 3% in 1993 to 6% in 2004. A 2012 term was priced to yield 5.75% and a 2025 term was priced to yield 6.40%.

The issue is rated A1 by Moody's and A-plus by Standard & Poor's.

PaineWebber also priced $40 million of Grand Rapids, Mich., sanitary sewer system improvement revenue bonds.

The offering included serials priced to yield from 5.15% in 1999 to 5.75% in 2005. A 2012 term was priced to yield 6.10% and a 2022 term was priced to yield 6.15%.

The bonds are rated A1 by Moody's and AA-minus by Standard & Poor's.

First Boston priced $35 million of Texas Veterans' Housing Assistance general obligation bonds.

The offering, subject to the alternative minimum tax, was priced at par to yield from 4% in 1994 to 5.80% in 2002. A 2012 super sinker was priced at part to yield 6.05% and a 2023 term, containing $20 million of the loan, was priced at par to yield 6.45%.

The bonds are rated double-A by Moody's and Standard & Poor's.

PaineWebber priced $33 million of Louisiana Public Facilities Authority hospital revenue and refunding bonds for the Pendleton Memorial Methodist Hospital project.

Serial bonds were priced at par to yield from 3.50% in 1993 to 6.30% in 2002. A 2010 term was priced as 6 3/4s to yield 6.85% and a 2022 term was priced as 6 3/4s to yield 6.95%.

The bonds are rated Baal by Moody's and BBB by Standard & Poor's.

Water District Plans Sale

The Metropolitan Water District of Southern California said it plans to sell $550 million of water revenue bonds on Aug. 4.

The deal will be sold without insurance and will include fixed-rate bonds, select auction variable-rate securities, and residual interest bonds, according to water officials. In addition, the loan is expected to carry bonds that mature as late as 30 years.

Bear, Stearns & Co. will serve as senior manager on the deal, while O'Brien Partners was tapped as financial advisor.

Wisconsin to Issue

The Wisconsin Building Commission will sell up to $312 million of transportation revenue and revenue refunding bonds some time next week, a state officer said yesterday.

First Boston and Lehman Brothers will serve as co-senior managers on the deal, which will include $118 million of refunding bonds and $194 million of new-money debt, he said.

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