Weaker-than-expected retail sales data gave municipals a lift yesterday, but gains were limited as market players were cautious ahead of today's inflation report.

More than $ 3.5 billion of new issues were priced Tuesday and Wednesday, and the market tone was heavy going into yesterday's retail sales report. Many traders were nervous by session's end Wednesday, worried that a greater-than-expected sales report could weaken the bloated market.

But traders were cheered when the May report showed a modest 0.2% jump, to a seasonally adjusted $158.8 billion, much less than the .7% gain that was generally expected.

Concern about today's consumer price data prevented prices from enjoying big gains, but by session's end tax-exempts were quoted up 1/8 point in spots.

In the debt futures market, the September municipal contract settled up 6/32 to 94.21, and the September MOB spread narrowed to negative 148 from negative 149 Wednesday.

Traders said yesterday that the Street owns significant supply and that the tone remains heavy.

Market players reported follow-through business in both the primary and secondary markets, with bonds going to permanent investors. Standard & Poor's Blue List of dealer inventory ros a modest $ 15 million, to $1.27 billion, while The Bond Buyer estimated 30-day visible supply at $3.3 billion.

In the primary sector, Chemical Securities reported an unsold balance of $47 million from $250 million New York State various-purpose, full faith and credit bonds, sold Wednesday.

Prudential Securities reported an unsold balance of $50 million from $145 million Washington Suburban Sanitary District, Md., unlimited tax bonds, also priced Wednesday.

First Boston Corp., senior manager for $85 million Utah GO bonds, reported an unsold balance of $34 million late in the session.

In other follow-through action, Smith Barney, Harris Upham & Co. freed $250 million Clark County, Nev., GO limited tax transportation improvement bonds from syndicate restrictions. In late secondary trading, the AMBAC insured 6s of 2016 were quoted at 93 1/2-5/8 to yield 6.54%. The bonds were originally reoffered to investors at 6.52%.

Secondary Market

Traders said that bid-wanted activity was light throughout the session, but that bonds were sold to permanent investors.

In secondary dollar bond trading, prices were quoted unchanged to 1/8 point better on average.

Puerto Rico GO 6.80s of 2021 were quoted at 101 1/4-1/2 to yield 6.634% on the bid side; Florida State Municipal Power Agency AMBAC 6s of 2027 were quoted at 93 1/4-1/2 to yield 6.49%; and New Jersey Turnpike Authority 6 1/2s of 2016 were quoted at 100-1/4 to yield 6.50%. Greater Orlando Aviation Authority AMT insured 6 3/8s of 2021 were quoted at 97 3/8-5/8 to yeld 6.57%; south Carolina PSA 6 5/8s of 2031 were quoted at 99-1/4 to yield 6.69%; and California 6 1/4s of 2012 were quoted at 97 1/2-3/4 to yield 6.47%.

New york City plans to sell $1.5 billion in tax anticipation notes and revenue anticipation notes near the end of this month competitively, according to Darcy Bradbury, the city's deputy comptroller for finance.

Ms. Bradbury, in a speech to retail investors of city bonds at the Helmsley Palace in New York City on Wednesday night, said the notes will be sold on June 25. The sale will close July 2.

City officials have for some time considered moving the date of the sale to late June from its traditional July or August date to take advantage of the surfeit of investor cash expected after July 1, when about $8 billion of municipal bonds will be redeemed.

Ms. Bradbury addressed about 100 city bond investors, in a presentation sponsored by Fidelity Capital Markets of Boston. In her speech, she discussed the problems as well as the strengths of New York City as a municipal credit.

In addition, Ms. Bradbury said the city plans to sell $75 million of zero coupon securities during its next bond sale in the fall as part of its "NYC Bonds," or "Mini-Bond" program.

In February, investors flocked to the city's $100 million sale of these securities, priced by Prudential Securities. The firm also will serve as lead underwriter for the upcoming issue.

LGAC to Tap Market

The New York State Local government Assistance Corp. plans to sell $300 million in bonds in late October or early November, a spokeswoman for state comptroller Edward V. Regan confirmed.

The sale would be the first issue in the 1993 fiscal year for the corporation, which was established in 1990 to help eliminate the state's spring borrowing. The state legislature has authorized the corporation to issue $975 million in debt for the current fiscal year. The money will be used to speed aid payments to local governments in the state.

The $300 million borrowing still needs approval from the corporation's board of directors.

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