Municipal bond funds may have strung together four weeks of positive cash flows, but you'd never know it from the bid lists out last week.

"Municipal bond funds, after experiencing outflows for much of the quarter, have seen inflows for each of the last four weeks ended Wednesday," said Bob Adler, president of AMG Data Services in Arcata, Calif.

While the total of $1 billion to $1.5 billion that has come into municipal funds in the weeks ended May 25, June 1, June 8, and June 15 was "not significant," where that cash went is, Adler said.

Two-thirds of that money went into load funds, which indicates greater demand from retail customers, he said. The money appeared to be distributed equally among all sectors of those funds, Adler said.

"He's right," said Robert W. Chamberlin, senior vice president and supervisory municipal analyst at Dean Witter Reynolds Inc. Chamberlin, however, while he agrees with Adler, said heavy selling by institutions last week presented a contradiction.

"While what [Adler's] saying is true, the enormous volume of bid lists [last] week gives some cause for second thought that we may not be out of the woods yet," Chamberlin said.

Some sources estimated that $500 million of bid lists hit the Street on Wednesday.

The market rallied last Tuesday on consumer price index and retail sales figures that favored the bond market, Chamberlin said.

Since then, commodities prices have risen in part because of a forecast for less rain in the Midwest. Another unfriendly factor for bond prices is crude oil prices, which have surpassed the $19 a barrel mark, Chamberlin said. Several other demons that have persistently dogged the market of late have also resurfaced, including concern over a possible war in North Korea and the deteriorating value of the dollar.

"It's the standard list," Chamberlin said.

Another municipal analyst said last week's funds' selling is attributable partly to housekeeping as the half-year nears and partly to the anticipation of higher rates. The analyst cited a 30 to 40 basis point improvement in the market in the past 30 days. Consequently, those who purchased bonds at the beginning of that run may find now a good time to take profits, he said.

On the buy side, Bill Veronda, portfolio manager of the $300 million INVESCO Tax-Free Long-Term Bond Fund, among other INVESCO portfolios, was not in a buying mood Friday.

Veronda, however, has seen inflows that he says merely reflect the municipal market's better course over the past four weeks.

"I'm keeping my powder dry. It looks like a good decision today," Veronda said. The portfolio manager said he will probably remain sidelined this week.

"I think municipals are rich and the bond market is fairly vulnerable in here," Veronda said.

Whether it happens in a month or three months, another Federal Reserve tightening of monetary policy is almost certain, said Veronda.

In addition, Veronda still sees a fairly good argument for a stronger economy judging from the data he's seen lately. Veronda also cited the U.S. dollar's sharp decline against the German mark Friday.

Veronda, however, said he could be tempted by this week's $419 million New York City Industrial Development Agency deal. "That could be potentially attractive at the right price," Veronda said.

As for Friday's market, municipals ended 5/8 to 3/4 points lower Friday in light activity.

"The market's trading off," one municipal trader said, adding that it was falling in sympathy with Treasuries.

The U.S. dollar's sharp fall, signs of strength in the University of Michigan consumer confidence survey, and higher commodities prices triggered a big drop in Treasury prices Friday. The government's 30-year bond ended down nearly a point to yield 7.44%.

The Michigan index climbed 94.5 in mid-June from 92.8 in May, while the current conditions index was at 107.3 versus 106.3, and the expectations index was up to 86.2 compared with 84.2 in May.

Dollar bonds ended 5/8 of a point lower for the day Friday, after having been off 1/8 point at noon. Yields on high-grade bonds rose about seven basis points over all, a municipal analyst said.

"It's all on quotes, not activity," the analyst said.

In the debt futures market, the September municipal contract closed down nearly 3/4 of a point to 90 25/32s. Friday's September MOB spread was negative 390, compared to negative 396 on Thursday.

San Joaquin Hills

In other developments last week, environmental groups opposed to the San Joaquin Hills toll road obtained a temporary stay that stopped work on one portion, pending a hearing on a petition to the Ninth Circuit Court of Appeals.

The San Joaquin Hills Transportation Corridor Agency won a battle last Tuesday when a federal judge lifted an injunction that had prohibited construction on part of the toll road in Orange County, Calif.

Following the lower court decision, bulldozers immediately began clearing land for the affected middle portion of the road. But construction stopped on Wednesday after the federal appeals court granted an emergency injunction.

The environmental groups want the injunction to stay in place until an appeal of the lower court decision can be heard. If they are successful, the corridor agency has said it will seek an expedited briefing schedule to bring the appeal to a decision as soon as possible.

The lower court decision, by U.S. District Court Judge Linda McLaughlin, upheld the legality of various environmental approvals for the toll road.

Environmental activists immediately protested McLaughlin's decision, with one of them going so far as to chain himself to one of the bulldozers.

The temporary injunction affects only the middle portion of the proposed toll road, with work continuing on both ends.

Strike Three for Pittsburgh

Moody's Investors Service on Friday downgraded Pittsburgh's general obligation debt to Baal from A.

On Thursday, Standard & Poor's Corp. and Fitch Investors Service downgraded the debt to A-minus from A.

The move affects $481 million of debt, said Craig Atwater, a vice president with Moody's. Most of the city's outstanding GO debt is insured, and only the underlying credit would be affected by the rating action, he said.

In a statement released Friday, Moody's said that "the factors important to the rating revision include a trend of recently weakened financial operations and uncertainties over the effectiveness of the city's multi-year fiscal recovery plan."

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