Municipal prices slipped 1/4 to 1/2 point in sympathy with the Treasury sector yesterday, forcing market players to debate for the third time in two weeks whether to sell off or buy the dip.

Reports of possible tax-relief legislation triggered a sell-off in the Treasury market of more than 1 point on the long end. Municipals lagged in the distance, but some off-the-run names fell nearly 1 point.

In the debt futures market, the December municipal contract closed down 19/32 to 94.00 with the December MOB spread calculated at negative 132.

The drop is the market's third in the last two weeks, but both previous moves were supported at lower levels by participants buying the dip.

"What happens today -- that's the trick," said one trader. "Everytime it has paid off to buy the dips, but sooner or later that's going to kick you."

Traders reported light activity in the secondary with bid-wanted activity termed moderate.

There were blocks out for the bid in the $4 million to $5 million range, including Texas ATM 7 3/8S of 2011 and $4 million of Denver Airport 7 3/4S. Market sources also said there was a $10 million block of Denver Airport bonds out for the bid.

In secondary dollar bond activity yesterday, North Carolina Eastern 6 1/2S of 2017 were quoted at 95 3/4-96 to yield 6.83% and Georgia MEAG 6.60s of 2018 were quoted at 98 3/8-lock to yield 6.73%. Denver Airport 7 3/4S, due 2021, were quoted at 94 1/2-3/4 to yield approximately 8.22%. New York City Water Authority 7s of 2015 were quoted at 99 5/8-3/4 to yield 7.11%, while Triborough Bridge and Tunnel Authority insured 6 5/8S were quoted at 98 5/8-7/8 to yield 6.71%.

Traders said the bid was weak and bonds were suffering from illiquidity late in the session as traders balked ahead of the growing new issue calendar.

The Bond Buyer's 30-day visible supply topped $4 billion yesterday, up $1.16 billion from $2.4 billion last Monday.

"Supply is coming and deals will have to be priced to sell in this market, unless it snaps back," a market participant said. "The new issues will be key to secondary levels."

New-issue activity was light yesterday, but Goldman, Sachs & Co. as senior manager tentativly priced $125 million of Detroit Economic Development Corp. resource recovery revenue bonds in the negotiated sector.

Market sources said the issue, subject to the federal alternative minimum tax, was tentatively priced to yield from 6% in 1997 to 6.65% in 2003.

A term in 2009 was tentatively priced to yield 6.975%.

The bonds are backed by Financial Security Assurance and carry triple-A ratings from both Moody's Investors Service and Standard & Poor's Corp. The issue carries an underlying rating of BBB-plus from Standard & Poor's.

In follow-through business in the competitive sector, Goldman, also senior manager for $120 million of Maryland general obligation bonds, reported an unsold balance of $49 million late in the session.

Meanwhile, in short-term note activity, yields rose five to 10 basis points, traders said.

In late secondary trading, Los Angeles tax and revenue anticipation notes were quoted at 4.35% bid, 4.30% offered. Texas Trans were quoted at 4.38% bid, 4.35% offered and Pennsylvania tax anticipation notes were quoted at 4.43% bid, 4.40% offered. New York City revenue anticipation notes were quoted at 5.05% bid, 5.00%.

Prerefunded bonds were quoted at 5.25% bid, 5.22% offered for national names callable in 1995.

Negotiated Pricings

An issue of $53 million of Kentucky Higher Education Student Loan Corp.-insured student loan revenue bonds was priced by a Smith Barney, Harris Upham & Co.

The offering included series B bonds, subject to the federal alternative minimum tax, priced at par to yield from 5.10% in 1992 to 6.50% in 2000. A 2003 term is priced at par to yield 6.80%.

Series C bonds, also subject to the AMT, are priced at par to yield from 5.60% in 1995 to 6.25% in 2000. A 2002 term is priced at par to yield 6.50%.

The offering is rated A by Moody's.

An issue of $44 million of Jacksonvill, Fla., excise taxes revenue bonds was also priced by a Smith Barney group.

The offering included $22 million of series A tax-exempt bonds priced at par at yield from 4.54% in 1993 to 6.40% in 2006.

A 2011 term is priced as 6.50s to yield 6.60% and a 2016 term is priced as 6.50s to yield 6.65%.

There also is $22 million of taxable Series B bonds priced at par to yield from 4.75 in 1993 to 6.50% in 2006.

A 2011 term is priced as 6.50s to yield 6.706% and a 2016 term is prices as 6.50s to yield 6.75%.

The bonds are insured by AMBAC and carry triple-A ratings from Moody's and Standard & Poor's.

An issue of $33 million of New York State Environmental Facilities Corp. state water pollution control revolving fund revenue bonds was priced by Kidder, Peabody & Co.

The offering included serials priced at par to yield from 6.30% in 1992 to 6.60% in 2012.

The issue is rated double-A by Moody's, Standard & Poor's, and Fitch Investors Service.

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