Futures made gains yesterday, but cash was mixed as the market held a quiet vigil ahead of today's employment report.

The market opened with a yawn, as the close of a dull week drew nearer. The market has been waiting for the results of today's June employment report, which could test current price levels.

Market players predicted that a report favorable for bonds could spark a strong rally, adding to current bullishness related to favorable supply and demand factors.

A negative number would likely set prices back, but tax-exempts have reason for strong underlying resilience because a sizable amount of cash should be invested in the market over the coming weeks at the same time as supply shrinks.

Traders yesterday gave little heed to initial state unemployment insurance claims, which fell 11,000 to a seasonally adjusted 340,000 in the week ended June 26. The drop was consistent with market expectations.

Bonds eked out slight gains after the National Association of Purchasing Management's index decreased to 48.3% in June from 51.5% in May, which was weaker than expected.

A reading above 50% indicates, in general, that the manufacturing economy is expanding, while a reading below 50% indicates a declining economy.

Yesterday was the largest call date in municipal bond history, with more than $15 billion in bonds taken out of investor hands.

Market players have been betting that the cash freed up from the calls will be reinvested in the tax-exempt market.

Prices stand to enjoy gains in the coming weeks as a result, but action was limited yesterday because the credit markets must first face the employment report.

Municipal trading was sparse and cash prices were quoted mixed by session's end, with some bonds posting 1/8 point gains in spots.

Debt futures managed to move higher than cash, but off the highs of the day.

The September municipal contract settled Up 3/32 at 102.09. The contract lost steam after Treasury bonds backed up ahead of the employment report.

The September MOB spread narrowed to negative 372 from negative 376 Wednesday.

Looking to supply, next week will feature some sizable offerings, but the slate of new issues is generally on the decline.

The Bond Buyer calculated 30-day visible supply at $3.8 billion. Secondary supply has increased slightly over the past two sessions, but has also been generally declining. The Blue List of dealer inventory rose $44.8 million. to $1.63 billion yesterday.

New issue action was practically non-existent, but underwriters reported some progress in follow-through business.

In the competitive sector, Dillon, Read & Co., senior manager for $300 million Florida Board of Education full faith and credit public education capital outlay bonds, reported an unsold balance of $60 million.

In the negotiated sector, Merrill Lynch & Co. freed $266 million Tennessee Housing Development Agency mortgage finance program bonds from syndicate restrictions.

Secondary Markets

In late trading, term bonds of 2028. originally priced at par to yield 5.95%, were quoted late yesterday at 100-1/4 to yield 5.95%.

In other secondary action, traders reported few bonds changing hands throughout the session.

In dollar bond trading, prices closed narrowly mixed.

In late action, Pennsylvania COP AMBAC 5s of 2015 were quoted at 92 1/4-5/8 to yield 5.61 %; Puerto Rico Public Improvement 5 1/4s of 2018 were quoted at 94 1/2-% to yield 5.66%; and Omaha PPD 5 1/2s of 2017 were quoted at 98 1/8-3/8 to yield 5.64%.

Seattle Light 5 3/8s of 2018 were quoted at 96 1/8-1/2 to yield 5.66%; Orange and Orlando FGIC 5 1/2s of 2018 were quoted at 5.62% bid, 5.61% offered; and Washington Public Power Supply System MBIA 5.70s of 2017 were quoted at 99 1/8-1/2 to yield 5.76%. Chicago GO FGIC 55/8s of 2023 were quoted at 98 1/8-3/8 to yield 5.75%.

In the short-term note sector yields overall were unchanged on the day, traders said.

In late action, Los Angeles County notes were quoted at 2.55% bid, 2.52% offered; New York State Trans were quoted at 2.20% bid, 2.15% offered; and Texas Trans were quoted at 2.25% bid, 2.20% offered.

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