Soviet turmoil quieted the corporate bond market yesterday, sources said.

"It was about as exciting as watching paint dry," said Jon Cuscani, a senior trader at Yamaichi International, referring to yesterday's "lackluster" trading.

Among the few venturing into the market was Waste Management Inc., which issued $200 million of notes yesterday to repay the same amount in commercial paper debt. The notes mature in 1996 and were priced at par to yield 7.875%, or 63 basis points over comparable treasuries. Merrill Lynch & Co. managed the deal. Moody's Investors Service rated the deal A-1, while Standard & Poor's Corp. gave it an AA.

Also yesterday, Avco Financial Services Inc. issued $200 million of senior floating-rate notes, due in 1994. The notes were priced by Merrill Lynch at par and will yield 10 basis points over 30-day commercial paper for the first year. The rate for each subsequent year will be negotiated between the issuer and the investment house, a Merrill Lynch source said. Moody's rated the notes A-2, while Standard & Poor's assigned an A rating.

Meanwhile, market appetite continued to be hearty for two of Monday's issues. Strong demand led PepsiCo Inc. to increase Monday's $250 million offering to $350 million yesterday. Lehman Brothers managed the transaction.

The notes carried a 7 7/8% coupon and were priced at 99.733 to yield 7.94%, or 70 basis points over comparable Treasuries.

Federal National Mortgage Association increased its $200 million medium-term note issue to $250 million. The notes maturing in 1998 were priced at par to yield 7.93% or 38 basis points over comparable Treasuries. Lehman Brothers managed the offering.

Like the high-grade market, the junk market also yawned yesterday.

"The market is looking rather dull," said Kingman Penniman, a senior vice president at Duff & Phelps/MCM, at midafternoon yesterday.

The timing of Dr. Pepper Co.'s $200 million offering of senior guaranteed notes and how the Soviet situation would unfold dominated attention there, he said. The Dr. Pepper deal includes $50 million of preferred stock, Mr. Penniman said.

Joseph Bencivenga, Salomon Brothers Inc.'s deputy director of high-yield research, yesterday morning said the market was thin but firming with a good deal of buyer interest remaining.

"People are buying," he said adding, there were "probably more buyers than sellers."

As for ratings, Standard & Poor's downgraded Sequa Corp.'s senior unsecured debt to BB-plus from BBB-minus and its subordinated debt to BB-minus from BB-plus. Sequa was also placed on CreditWatch for a possible downgrade. The change affects about $500 million of rated debt. Standard & Poor's actions reflect the firm's weakened financial state, as illustrated by higher debt leverage and failure to comply with bank covenants, the agency said.

Also, Standard & Poor's placed Southdown Inc.'s $90 million of senior subordinated debt, rated BB-minus, on CreditWatch for a possible downgrade. The implied senior debt rating is BB-plus and total debt outstanding is approximately $350 million, the agency said. The listing stems from agency concerns over near-term liquidity in the face of potential covenant violations Sept. 30 on the company's Series B senior notes.

Standard & Poor's also assigned a preliminary AA-minus rating to Volkswagen AG's long-term debt and a preliminary A-1 plus rating to the company's short-term debt.

Though not yet assigned to specific debt issues, Standard & Poor's believes the ratings will be assigned to Deutschemark and Eurocommercial paper programs shortly. The rating is expected to be the first assigned to a German company in the Deutschemark commercial paper market. The ratings reflect Volkswagen's position as Europe's leading volume car manufacturer and the group's strong financial shape.

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