Municipal prices retreated slightly in the face of advancing supply yesterday, dominated by $600 million of Houston revenue bonds, the largest deal of the week.

Friday's October employment data had convinced the market that the Fed would cut the discount rate to 4 1/2% from the current 5% rate and possibly let the fed funds rate fall an additional 25 basis points to 4 3/4%. But the move failed to materialize, pushing prices 1/8 to 1/4 point lower in the morning, where they remained for the rest of the session.

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