Consumer price data drove municipals down 1/4 to 3/4 point yesterday as traders see-sawed between selling off with Treasuries in a major correction or buying the dip.

The markets were anticipating an imminent Fed ease until the consumer price index revealed a 0.4% jump in September, the largest increase since January.

Tax-exempts lagged governments, which fell as much as 1 3/8 point on the news, as market players deliberated between selling off or buying at lower levels.

"It's been a long time since we've had a major correction, but buying the dips has proved to be a pretty positive trade," said a major highyield portfolio manager. "There's still money out there and if you see some weakness you want to try to take advantage of it."

In secondary trading, bid-wanted flow was heavier and there were some sizeable blocks trading, many at slight premiums.

But other market participants said the teetering market is due for a correction and yesterday may be the first leg. "People still want to buy because of our technicals, but we're due for something," a New York-based trader said. "Spreads are tight on secondary trades and supply is coming. This market's not sure what it's going to do."

In the debt futures market, the December municipal contract settled down 18/32 to 94.10 and the December MOB spread moved to negative 138 from negative 159 the previous session.

In secondary trading, traders reported a steady flow of bid-wanteds and prices were off 1/4 to 3/8 on average, but more in spots.

A $12.5 million block of San Antonio 6 1/2s of 2012 were said to have traded around a 6.74% and retraded around 6.70%; $10 million Massachusetts GO 6 3/4s of 2009 were rumored to have traded at a slight premium, and $4.5 million Port Authority of New York and New Jersey 6 3/4s of 2026 were also said to have traded at a slight premium around 6.73%.

In secondary dollar bond activity, Denver Airport 7 3/4s of 2021 were quoted down about 1/4 to 95 1/4-1/2 to yield approximately 8.15%. New York City Water Authority 7s of 2015 were quoted down 1/8 to 99-3/8 to yield 7.05%, while Triborough Bridge and Tunnel Authority insured 6 5/8s fell about 1/8 to 99-3/8 to yield 6.67%

Primary activity was relatively light, and underwriters said that the market downturn forced upward adjustment on some bonds.

A group including Lazard, Freres as senior manager tentatively priced and repriced $220 million Florida certificates of participation for the consolidated equipment financing program to raise yields 2.5 to five basis points throughout the loan.

The market had only a slight influence on the deal, a Lazard officer said, as presale work attracted a lot of early orders. The bulk of the orders went to institutions, but there was some follow-up retail business, the officer said.

The officer added that the deal did not suffer from circumstances surrounding a COP deal sold by Brevard County, Fla. (See story Page 1.)

The final pricing included serials priced at par to yield from 4.70% in 1992 to 6.125% in 1999.

The COPs are rated A by Moody's investors Service and A-plus by Standard & Poor's Corp.

Merrill Lynch as senior manager priced and repriced $95 million New Jersey certificates of participation to raise some yields five to 10 basis points.

A Merrill Lynch officer acknowledged the sour market inhibited the deal's progress.

The final terms included $55 million equipment certificates priced to yield from 4.60% in 1992 to 6.35% in 2002. A 2005 term is priced as 6.40s to yield 6.55%. There also were $40 million taxable service certificates priced to yield from 5.60% in 1992 to 7.70% in 1996.

A 2001 term is priced as 8 1/2s at par, and a 2005 term is priced as 9s at par.

The issue was rated A1 by Moody's and A-plus by Standard & Poor's.

In light competitive action, Smith Barney, Harris Upham & Co. won $82 million Metropolitan Seattle, Wash., limited sales tax GO refunding bonds in close bidding.

Smith Barney won the bonds with a Canadian interest cost of 6.7608%. Morgan, Stanley had the cover bid with a CIC of 6.7697%.

The bonds were priced to yield from 5.60% in 1997 to 6.50% in 2006.

Term bonds were priced to yield 6.70% in 2011, 6.80% in 2017, and 6.875% in 2020. A 2008 term was not formally reoffered to investors.

An unsold balance of $15 million was reported late in the session.

The issue is rated Aa by Moody's and A-plus by Standard & Poor's.

In follow through business, Goldman, Sachs, senior manager for $120 million Maryland GOs, reported an unsold balance of $56 million late in the session.

In short-term note trading, yields rose about 10 basis points on average in sympathy with the drop in Treasuries.

In late secondary trading, Los Angeles Trans were quoted at 4.33% bid, 4.30% offered. Texas Trans were quoted at 4.32% bid, and Pennsylvania Tans were quoted at 4.40% bid, 4.35% offered. New York City Rans were quoted at 5.00% bid.

Negotiated Pricings

Smith Barney, Harris Upham & Co. priced $55.5 million Collier County, Fla., Water Sewer District water and sewer revenue bonds.

The offering included serials priced to yield from 4.50% in 1992 to 6.35% in 2006. A 2011 term is priced as 6 1/2s to yield 6.60% and a 2021 term is priced as 6 1/2s to yield 6.65%.

The bonds are FGIC-insured and triple-A rated by Moody's, Standard & Poor's, and Fitch Investors Service.

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