Municipals ended unchanged to 1/8 point lower in a lifeless session on Friday.

"We're queuing up on the computer for the solitaire game," one trader said. As far as market activity went, the trader said, "we'd be [down] if there had been a trade."

While Friday was dull, this week could be even quieter, he said.

"It is extremely quiet and I think [this] week could be the quietest week of the year," he said. The trader said that includes Christmas week. With Labor Day approaching, little is likely to get done, the trader said. "It's Friday during the summer, that's the problem," a second trader said, adding that municipals were "just drifting down with Treasuries." The 30-year Treasury bond ended down less than 2/32s to yield 7.48%

Dollar bonds dropped 1/8 point Friday, while high-grade issues were unchanged to slightly lower, a municipal analyst said. Despite the slight weakness, the market did gain some confidence, and should head into this week on a firmer note, he said. In addition to low supply, the market got rid of some emotional baggage las! week with the Federal Reserve's 50-basis-point rate increase in both the federal funds rate and the discount rate.

"Most of the damage got out of the way last week," the analyst said.

In debt futures, the September municipal contract ended down 1/32 to 90 18/32s. Friday's September MOB spread was negative 392, compared with negative 388 on Thursday.

Brian Wesbury, chief economist at Griffin, Kubik, Stephens & Thompson Inc. agreed that this has been a quiet period.

"New issues have slowed down to a trickle." Wesbury said. "The big news, of course, is the Fed and the Treasury market's reaction, and everybody's just waiting to see which way we go."

He noted that municipal yields have dropped to the low 70s as a percentage of Treasuries in the 10-year area. "which does make them very expensive relative to

the taxable side."

Municipals, however. haven't gotten rich without reason. Wesbury said. With the top tax bracket at 39.6%, yields in low 70% range as a percentage of Treasuries yield range don't look so bad. he said. While people are looking to municipals to help ease their tax bite, the economy also is picking up, which should translate to higher state tax revenues. As the tax revenues increase, default risk decreases. making municipals a safer investment. Wesbury said.

Turning to new issues, this week's competitive calendar features $111 million of Los Angeles general obligation bonds on Tuesday, $49 million of Pennsylvania certificates of participation on Wednesday, and $88 million of Atlanta various improvement bonds on Thursday. In the competitive short-term note market. Texas will sell $1.7 billion of tax and revenue anticipation notes on Wednesday.

This week's biggest negotiated deal so far is $275 million of Contra Costa Water District (Calif.) water revenue bonds. The issue is expected to be priced through Merrill Lynch & Co. on Wednesday. Tomorrow, a $152 million of New York State Mortgage Agency offering is expected through CS First Boston.

While those deals may be arriving this week. some question remains as to whether buyers will step up.

"The cash flow has just slowed down dramatically into the bond funds," a municipal trader said. With Tuesday's increase in shortterm rates. Mom and Pop now appear to be putting their money into short-term funds to take advantage of the higher yields they now offer. he said.

According to AMG Data Services, investors have withdrawn more than $700 million from municipal bond funds during the weeks ended Aug. 10 and Aug. 17.

In other news Friday. the 30-day supply of municipal bonds totaled $3.43 billion. up $472.7 million from Thursday. That comprises $1.376 billion of competitive bonds. up $55 million from Thursday, and $2.05 billion of negotiated bonds. up $417 million from yesterday.

Standard & Poor's Corp.'s Blue List inventory of municipal bonds rose $79 million on Friday to $1.7 billion

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