Municipals lagged Treasury gains yesterday and new deals were mixed as the market slogged toward the end of a quiet summer week.

The Treasury market had another record day, thanks to long bond buyers and weak economic news.

The U.S. merchandise trade deficit surged 44% in June to $12.1 billion as imports advanced and exports fell, the Commerce Department reported. The trade news confirmed the market's view that the economy is moving at a slow pace and pointed toward a downward revision in second quarter gross domestic product.

The manufacturing sector also gave evidence in of weakness in the Philadelphia Fed business report, which showed that a summer slump is continuing.

Many traders reported little action in the tax-exempt arena.

Some retail bid-wanted was reported, but traders said the product was bought at aggressive levels.

By session's end, dollar bond prices were mixed, but active bonds were up 1/8 to 1/4 point in spots, traders said. High-grade bonds were said to be unchanged.

In the debt futures market, the September municipal contract settled up 4/32 to 103.31. The MOB spread widened to negative 403 from negative 399 Wednesday as governments outpaced municipals.

Secondary supply continued to climb. The Blue List surged $270.2 million yesterday, to $1.67 billion. The Blue List has risen $450 million since last Friday when it totaled $1.22 billion.

Looking ahead, traders said they expected the light trading to continue until next week's new issues hit the market and give prices a direction.

New Deals

A syndicate led by Morgan Stanley & Co. as senior manager priced $490 million revenue refunding bonds for the Michigan Building Authority.

The firm said it received the verbal award at the original price levels, although a 2012 maturity was added. The account was closed.

The final offering included $474 million serial bonds priced to yield from 2.30% in 1993 to 5.42% in 2012, while a 2016 term, containing $54 million, was priced as 5.30s to yield 5.45%. There also were $16.5 million special sinking fund bonds, priced at par to yield 4.20% in 2013, with an average life of 3.5 years; priced at 5% in 2014, with an average life of 8.7 years; and priced at 5.25% in 2015, with an average life of 11.1 years.

Serial bonds through 2004 are non-callable.

Bonds due in 1999-2003, 2005-2011, and 2016 are insured by the AMBAC Indemnity Corp. and rated triple-A by Moody's Investor's Service and Standard & Poor's Corp. The remaining bonds are rated A by Moody, AA-minus by Standard & Poor's, and Fitch Investors Service.

Elsewhere, Grigsby, Brandford & Co. priced $299 million lease revenue refunding bonds for the Sacramento City, Calif., Financing Authority.

The firm said it received the verbal award at the original price levels.

The offering included $133 million non-callable Series A bonds priced to yield from 2.75% in 1994 to 5.20% in 2008. A 2014 term was priced as 5 3/8s to yield 5.40% and a 2020 term was priced as 5.40s to yield 5.45%. There also was $96 million Series B bonds priced to yield from 2.80% in 1994 to 5.30% in 2008. A 2014 term was priced as 5s to yield 5.46% and a 2020 term was priced as 5.40s to yield 5.55%

The bonds are AMBAC-insured and rated triple-A by Moody's and Standard & Poor's

Bear, Stearns & Co. priced and repriced $177 million revenue bonds for the Indiana State Office Building Commission Capital Complex.

At the repricing, yields were lowered by five basis points in 1996 and in 1994 for Series C bonds, while yields were raised on the remainder of the loan.

The final offering included $42 million Series A bonds, $107 million Series B bonds, priced to yield from 3.80% in 1996 to 5.40% in 2010 and 5.5701% for term bonds in 2015. There also was $28 million Series C bonds priced to yield from 2.75% in 1994 to 5.45% in 2010 and 5.558% in 2015.

The issue is AMBAC-insured and rated triple-A by Moody's and Standard & Poor's.

In light competitive action, $93 million San Antonio, Tex., limited tax general improvement and refunding bonds were won by Bear Stearns; J.P. Morgan Securities Inc.; and Dillon, Read & Co. as co-managers.

An unsold balance of $2.7 million was reported late in the day.

Serial bonds were reoffered to investors at yields ranging from 3.40% in 1995 to 5.25% in 2010. Bonds in 2009 and from 2011 through 2014 were not formally reoffered.

The San Antonio issue is rated double-A by Moody's, Standard & Poor's, and Fitch Investors Service.

Secondary Markets

Traders continued to report spotty secondary action.

In secondary dollar bond trading, prices were quoted up 1/8 to 1/4 point, and 3/8 point in spots, traders said.

In late action, Cook County GO 5 3/8s of 2018 were quoted at 5.55% bid, 5.53% offered; Charlotte COP AMT AMBAC 5 1/4s of 2021 were quoted at 5.47% bid, 5.44% offered; and New York State Dormitory Authority 5 1/4s of 2019 were quoted at 5.62% bid, 5.60% offered.

Philadelphia Water MBIA 5 1/4s of 2023 were quoted at 5.52% bid, 5.50% offered; PICA MBIA 5.60s of 2015 were quoted at par-bid none to yield 5.59%; and Fulton-DeKalb Hospital MBIA 5 1/2s of 2020 were quoted at 99-3/8 to yield 5.57%.

In short-term note trading, yields were about three basis points lower on the day, traders said.

In late action, California notes were quoted at 2.80% bid, 2.75% offered, and New York State notes were quoted at 2.53% bid, 2.48% offered.

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