Investors grabbed lofty yields on $1.2 billion of New York City bonds yesterday, while traders reported a queasy secondary market, thanks to supply and uncertainty about $415 million of Metropolitan Transit Authority bonds.

A 28-member syndicate, led by J.P. Morgan Securities, marketed the New Yok City issue, which was originally planned for sale Tuesday. The deal was held after New York State made a surprise announcement that its budget deficit nearly doubled to $3.6 billion.

Most bonds were priced as original issue discounts with a maximum yield of 7.87%.

"Cities, at this juncture, are in their own range," said Damon P. Smith, managing director at J.P. Morgan. "The bonds are priced attractively and people see a lot of value in there."

Mr. Smith said the deal benefited from a good mix of orders, both pri and member. About $380 million of the deal, which was broken down in three groupsm was sold on a priority basis.

Underwriters were able to lower yields by 10 basis points in the 1992 and 1992 maturities.

The bonds, which the city sold to defease insured debt, were priced to yield from 4.50% in 1992 to 7.85% in 2020. Coupons ranged from 4.60% in 1992 ro 7.75% in 2010 and 7% in 2020.

The bonds are rated Baal by Moody's Investors Service and A-minus by Standard & Poor's Corp.

In addition, the firm devised an escrow portfolio for the deal's proceeds. That portfolio will save the city $26 million that it would have lost had its proceeds been invested in State and Local Government Series sold by the U.S. Treasury, according to Eric H. Altman, a managing director in the public finance department at J.P. Morgan.

The firm will deliver the open market securities portfolio to the city as the deal's closing early next month.

Market players noted that deal came at a 20 basis point concession to New York City bonds outstanding in the secondary market, thanks to the budget disruption and the large amount of New York City issuance.

"We are in for some New York City bonds," said David Johnson, high-yield portfolio manager at Van Kampen Merritt Investment Advisory Corp. "The 7. 7/8% yield reflects the city's volume of bonds [outstanding] more than anything else."

"If the city sold $100 million a year instead of one billion every quarter, they'd do better," Mr. Johnson added. "They priced it where it would attract some interest."

Meanwhile, in new-issue action in the competitive sector, $250 million Florida Board of Education public education capital outlay bonds were won by a Dillion, Read & Co. group with a Canadian interest cost of 6.654169%.

The offering included serials priced to yield from 4.60% in 1993 to 6.60% in 2011. A 2022 term is priced as 6.70s to yield 6.71%. The bonds are rated double-A by Moody's and Standard & Poor's.

Dillon, Read reported an unsold balance of $21 million near session's end.

Market sources said bonds were trading professional near the takedown.

An issue of $130 million Washington Suburban Sanitary District, Md., unlimited tax general construction bonds was won by a Morgan Stanley & Co. group with a true interest cost of 6.5155%.

Serial bonds were priced to yield from 4.50% in 1993 to 6.60% in 2016.

The issue is rated Aa1 by Moody's and AA by Standard & Poor's.

The issue is rated Aa1 by Moody's and AA by Standard & Poor's.

The New Jersey Turnpike Authority opted not to price its $1.6 billion offering yesterday. An underwriter at Merrill Lynch & Co. and officers at financial advisers Lazard Freres & Co. said the deal could be priced any day, depending on market conditions. Several market sources speculate that the issue may be delayed until the first or second wekk of December.

Secondary Sector

Traders reported a heavier tone, and secondary prices were slightly lower, although activity was subdued.

Standard & Poor's The Blue List of municipal bonds rose $98 million to $1.51 billion, but bid-wanted flow was termed moderate and some traders reported good business.

"We're off from the highs of the last couple of days, and some people are starting to take a look at the market," said a trader. "The last couple of days everybody was pretty much a seller, now you may find some people starting to go back to the other side."

In secondary dollar bond trading, prices were quoted unchanged to down 1/4 point, depending on the name.

North Carolina Eastern 6 1/2s of 2017 were quoted at 96 1/4-3/8 to yield 6.81%. Washington Public Power Supply System 6 7/8s of 2017 were quoted at 98 1/2-99 and Massachusetts Water Resource Authority 6 1/2s of 2019 were quoted at 94-3/8 to yield 6.96%.

In other action, secondary traders speculated on the ramifications of New York State's surprise announcement that its budget deficit has almost doubled, hitting $3.6 billion, and its effect on the fate of $415 million MTA bonds marketed last week by Goldman, Sachs & Co. (See story Page 1.)

The deal became tangled in the state's budget problems. Goldman opted to reprice the bonds in the secondary market, raising serial bond yields 5 to 15 basis points to reflect the current market. In addition, the firm said term bonds will be done on a group net basis.

"All things considered, it looks like they rescued that deal from a more perilous fate," said one market player. "But we're going to have to wait a while to see how it actually shakes out."

Meanwhile, short-term note yields were unchanged to three basis points lower on the day, except for New York State paper where yields rose about 10 basis points.

In late secondary trading, Los Angeles Trans were quoted at 4.10% bid, 4.05% offered. March New York State Trans were quoted at 5.15% bid, 5.10% offered, and New York City Rans were quoted at 4.95% bid, 4.90% offered. Texas notes were quoted at 4.10% bid, 4.10% offered in late cash trading.

In new-issue activity, Oakland, Calif., tapped the market with $35 million in top-rated tax and revenue anticipation notes. Goldman Sachs & Co. won the deal with a true interest cost of 4.225%, a source at the firm said.

A $30 million note offering by the San Jose Redevelopment Agency, meanwhile, has been put on hold.

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