Municipals were narrowly mixed in sparse trading after yesterday's abbreviated holiday session.

But market players say the next wave of new issues, some $6.7 billion of which are slated for sale this week, is expected to drive interest rates slightly higher.

The futures markets closed by 1 p.m. eastern standard time in observance of the Columbus Day holiday.

Municipal cash trading was open and activity quiet. It followed the government market, which was open for trading in London.

Treasury prices managed slight gains on renewed anticipation of a Fed ease, even though the market gave up hope for an ease Friday.

Boosting the market, Federal Reserve Board Chairman Alan Greenspan on Saturday during a press conference indicated the presidential election is no a constraint on monetary policy.

The Treasury market took the comment as a positive sign for possible Fed ease.

Government bonds sold off Friday after giving up on the possibility of Fed action until after the election in November.

But the tax-free market was listless, despite the better Treasury market, and prices closed mostly unchanged at the end of last week.

In the debt futures market yesterday, the December municipal contract settled up 3/32, to 95.26.

New-Issue Market

Market players said they expected new issues to be priced with slightly higher yields compared with last week's levels, but a significantly stronger government market could keep rates down.

The presidential debates, meanwhile, appeared to have little impact on the markets with results meeting current expectations.

Some market observers have noted that a Clinton victory would mean short-term volatility in the bond markets, with yields rising overall. They are quick to add, however, that while the market becomes acquainted with any proposed fiscal-stimulus package, the overall dismal economic picture will keep rates low.

On the immediate horizon, the market will grapple with a new wave of supply, and market players called for slightly higher interest rates as a result.

The Bond Buyer calculated 30-day visible supply at $8.7 billion, while The Blue List of dealer inventory fell $24.7 million, to $1.22 billion.

An issue of $1.3 billion California general obligation bonds, to be sold in the competitive sector tomorrow, will dominate new-issue action.

Market players estimated yesterday that bonds in 2010 and 2011 would yield 6.25%.

The primary sector was quiet yesterday, but in follow-through business, Merrill Lynch & Co. freed $70 million of North Carolina Medical Care Commission hospital revenue bonds from syndicate restrictions.

In trading yesterday, the 6s of 2024 were quoted at 94 1/8-1/2, to yield 6.436% on the bid side. The bonds were originally priced to yield 6.377%.

Sparse Secondary

Secondary trading was extremely light, traders said, although there were some larger block of bonds out for the bid. Among the blocks out for the bid were $7 million of Montgomery, Ala., water and sewer bonds and $5 million of Ohio Water Authority bonds, traders said.

In secondary dollar bond trading, prices were narrowly mixed on the day.

Late in the abbreviated trading session, Los Angeles Department of Water and Power 6s of 2032 were quoted at 94 3/4-95 1/4, to yield 6.364%; Washington Public Power Supply System 6 1/2s of 2015 were quoted at 98 5/8-7/8, to yield 6.617%; and Puerto Rico GO 6s of 2014 were quoted at 94 7/8-95 1/4, to yield 6.441%.

New York City Water Authority 6s of 2017 were quoted at 92 1/4-3/8, to yield 6.642%; Denver Airport AMT 6 3/4s of 2022 were quoted at 95 1/2-3/4, to yield 7.115%; and Florida Board of Education 6s of 2025 were quoted at 94 3/4-bid, to yield 6.384%.

Short-term note yields were unchanged to five basis points lower, traders said.

In late action, notes of Los Angeles, New Jersey, Pennsylvania, Texas, and Wisconsin were quoted at 2.73% bid, 2.65% offered.

New York State Trans were quoted at 2.65% bid, 2.60% offered; and January California notes were quoted at 2.87% bid, 2.85% offered.

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