Municipal investors dived headfirst into a shallow sea yesterday, as over $3.4 billion in new bond issues were priced with some of the lowest yields in years.

Although many investors clamored for bonds yesterday, high-grade issues lost up to 3/8 point, with some buyers willing to wait out current levels.

"Investors of long-term paper can see the calendar of new issues starting to build and are willing to wait this run out," one analyst said. "In the last few sessions, high-grades have come down as much as 1/2.

But the analyst warned that the desire for bonds remains high, and the market still has the ability to spike yet higher on weak news.

"If the July unemployment report comes in like last month's then you can expect a return to the sky," said a head of one trading desk.

The employment figures are released Friday morning.

With yields at recent record lows, several market participants reported that demand for bonds was the largest single factor causing the rally investors' wallets have been fattened by the massive refunding of bonds begun on July 1, and demand has never been better, say traders.

"The market made a bit of a rebound at just the right time," said one trader. "We knew there would be a heavy slate of deals today, but the report on indicators was just enough to insure that the deals would fly."

Prices were given an early boost yesterday when the report on leading economic indicators fell 0.2% in June, marking the first monthly drop since last December.

Forward supply continues to favor tax-exempts. Visible supply, as measured by The Bond Buyer, was reported at $5.81 billion. Standard & Poor's's Blue List, a measure of dealer inventory, stood at $1.16 billion.

Representative of the view of most issuers enjoying current low yields was Bruce Bohlen, assistant treasurer for the Port Authority of New York and New Jersey. The authority sold $219 million refunding bonds and, according to Mr. Bohlen, saved approximately $13 million in debt service costs.

"The savings right now, when you compared the cost of the bonds we refunded and the ones we issued was outstanding." Mr. Bohlen said.

In the largest deal of the day, Smith Barney, Harris Upham & Co. priced and repriced $1.02 billion New York City Municipal Water Finance Authority water and sewer system revenue bonds. There were three sections to the deal.

The loan consists of $770 million uninsured current interest bonds, with serials priced to yield from 3.10% in 1993 to 6.15% in 2011, and two term bonds. The first term matures in 2017, totals $299 million, and was priced as 6s to yield 6.30%. The second term matures in 2020, contains $202 million of the loan, and is priced as 5 1/2 to yield 6.25%.

The offering also contains $110 million AMBAC-insured current interest bonds, featuring three term bonds. The first matures in 2012 and is priced as 5 7/8s to yield 5.95%. The second matures in 2013 and is priced as 5 7/8 to yield 5.57%. The final term matures in 2018 and is priced as 5 3/4 to yield 6.10%.

The third portion of the loan consists of $70 million Series D bonds, maturing in 2018 and priced as 5 3/4 to yield 6.10%. This portion of the loan received insurance from FGIC.

The offering also contained $70 million MBIA-insured non-callable capital appreciation serial zero coupon bonds. The zeroes are priced to yield from 5.70% in 2002 to 6.15% in 2011.

At the pricing, yields were lowered anywhere from three to five basis points. Also, there is an additional $70 million contained in the uninsured serial portion of the loan.

Hefty Slate of New Deals

In other negotiated pricings, First Boston Corp., serving as senior manger, priced an issue of $690 million San Antonio electric and gas system revenue refunding bonds.

The loan was priced to include serials priced to yield from 2.75% in 1993 to 5.70% in 2005.

There are also four term bonds. The first matures in 2007, contains $98 million of the total loan, and is priced as 5,80s to yield 5.85%. The second contains $109 million maturing in 2009, priced at par to yield 6%. The third term totals $156 million, matures in 2013, and is priced as 5 3/4s to yield approximately 6.073%. The final term consists of $142 million maturing in 2017, priced as 5s to yield approximately 6.067%.

The offering was rated Aa1 by Moody's Investors Service.

A group led by Bear, Stearns & Co. priced an issue of $550 million Metropolitan Water District of Southern California water revenue bonds.

The loan contains serial bonds priced to yield from 3.90% in 1995 to 5.80% in 2009.

The offering also contained four term bonds. The first matures in 2013, and is priced as 5 1/2s to yield 6%; the second term matures in 2019 and is priced as 5 1/2s to yield 6.013%. The third matures in 2020 and is priced as 5s to yield 6%. The fourth term matures in 2022, contains $74 million of the loan, and was not formally reoffered to investors.

The issue is rated Aa by Moody's and AA by Standard & Poor's Corp.

At repricing, yields of the 1995 through 1997 maturities were lowered 10 basis points, and yields on the 1998 and 1999 maturities were lowered five basis points.

Also, a 2008 maturity was added to the serial bonds, a 2012 maturity was extended out to 2013, and a 2018 term was extended out to 2019.

A group led by Merrill Lynch & Co. priced and repriced an issue of $79 million certificates of participation, Series 1992, for the school board of Collier County, Fla., as part of that county's master lease program.

The loan contains serials priced to yield from 2.75% in 1993 to 5.90% in 2006. There are two term issues. The first comes due in 2008 and is priced as 5 7/8 to yield 6%. The second matures in 2012 and is priced as 6s to yield 6.10%.

The loan is FSA-insured and rated triple-A by Moody's and Standard & Poor's.

At repricing, yields were lowered by five basis points for the 1993, 1994, 2003, and 2004 maturities. Yields were raised five basis points on the 2005 and 2006 maturities; the 2009 term bond was replaced by a 2008 maturity.

Competitive Deals

Not to be outdone by the negotiated sector, the competitive sector swung into action yesterday with deals priced at some of the lowest yields of the year.

The largest deal consisted of $250 million Florida Board of Education full faith and credit bonds, won by a Merrill Lynch & Co. group with a true interest cost of 5.96%.

The loan contains serial bonds priced to yield from 3.75% in 1994 to 5.90% in 2009. There are three term bonds. The first matures in 2012 and priced as 5.90s to yield 6%. The second matures in 2015, and is priced as 6s to yield 6.05%. The final term matures in 2022, and is priced at par to yield 6%.

The bonds are rated Aa by Moody's and AA by Standard & Poor's.

According to a senior member of the syndicate, there was an unsold balance of $9 million late in the session.

Also offered via competitive sale was an issue of $219 million Port Authority of New York and New Jersey, apparently won by a Goldman, Sachs & Co.-led group with a Canadian interest cost of 5.672%.

The loan contains serial bonds priced to yield from 2.70% in 1993 to 5.90% in 2010. There are two term bonds. The first matures in 2013 and is priced as 5 5/8s to yield 5.983%. The second matures in 2014 and is priced as 5 5/8s to yield 5.975%.

The issue was rated A1 by Moody's and AA-minus from Standard & Poor's Corp. and Fitch.

Bear, Stearns & Co. provided the cover bid on the deal, coming in with a CIC of 5.7115%.

A member of the Goldman underwriting team said late in the session that there was a $7 million unsold balance on the offering.

A prudential Securities group won and issue of $215 million Los Angeles Department of Water and Power electric plant revenue bonds with a true interest cost of 6.0828%.

The loan contains serial bonds priced to yield from 4.70% in 1998 to 6% in 2012. There is also a term bond maturing in 2032 containing $84 million of the loan, priced as 6s to yield 6.134%.

The issue was rated Aa by Moody's.

Late in the session, Prudential reported a $16 million unsold balance on the issue.

A syndicate headed by Dean Witter Reynolds apparently won $77 million Las Vegas Valley Water District, Nev., limited tax GO water improvement refunding bonds with a true interest cost of 5.6869%.

The loan contains serial bonds priced to yield from 2.80% in 1993 to 5.95% in 2009. There is one term bond maturing in 2012 priced as 5 3/4s to yield 6.05%.

The bonds are MBIA-insured and rated triple-A by both rating agencies.

Late in the session, a member of the Dean Witter underwriting team reported an unsold balance of $40 million.

Secondary markets

Secondary participants reported that the bulk of yesterday's activity was focused on the primary sector, but that the tone of the market improved throughout the session. "We were helped just a bit by this morning's indicators figure," said a trader. "Then the performance of the deals priced helped give the secondary market more strength."

The trader said that by late in the session prices were as much as 1/4 point higher.

In secondary dollar bond trading, Berks County, Pa., 5 3/4s of 2012, were quoted at 97 3/4 to yield 6.01%; Jacksonville Electric Authority 5 1/2s of 2014 were quoted at 93 5/8-94 1/4 to yield 6.03%; Los Angeles Department of Water and Power 6s of 2030 were quoted at 97 3/4-7/8 to yield 6.15%; Puerto Rico Electric Power Authority 6s to 2010 were quoted at 98 1/4.-1/2 to yield 6.16%; and New Jersey Turnpike Authority 6 1/2s of 2016 were quoted at 106 1/4-107 to yield 6.00%.

In short-term action, traders reported a slow day with yields dipping as much as seven basis points in spots.

In late trading, Iowa Trans 3 1/2s were quoted at 3.05% bid, 2.97% offered, Los Angeles Trans 3 3/4s were quoted at 2.82% bid, 2,75% offered, and New York City Tans 3 1/4% were quoted at 2.85% bid, 2.70% offered. Wisconsin 3 3/4s were quoted at 2.84% bid, 2.80% offered, while New York State Trans 3.65s were quoted at 2.88% bid, 2,85% offered.

LGAC To Return to Market

The New York Local Government Assistance Corp. announced yesterday its intention to offer as much as $375 million bond during the week of Sept. 7, to provide further assistance to the state's local governments.

According to Cynthia M. Munk, spokeswoman for corporation, the sale will be the first of the 1992-93 fiscal year. The maximum amount of debt the corporation can offer in a fiscal year is $975 million.

The corporation's board must approved the offering prior to sale, and according to a release, that is expected in mid- or late-August. LGAC has issued five series of bonds totaling over $2.4 billion.

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