Inflation and supply-related concerns yesterday overrode Treasury gains as tax-exempts closed mixed in listless trading.

Action was listless after market players heard reports indicating that the Federal Reserve Board may tighten monetary policy in response to signs of higher inflation.

Worries over inflation were sparked two weeks ago by greater-than-expected gains in the consumer and producer price indexes and by growing money supply, exacerbated by concerns the Fed would tighten monetary policy as a result.

The 30-year Treasury bond later posted gains of slightly more than 1/2 point, thanks to short-covering and lower commodities and precious metal prices, but municipals marked time.

Tax-exempt bids were said to firm near session's end when the 30-year moved back through 7%.

By session's end, prices were mixed overall.

In the debt futures market, the June municipal contract settled up 3/32, to 99.30.

The June MOB spread widened to negative 331 from negative 317 Friday.

Over the long term, the market also doubts the federal government's ability to pass an acceptable budget, which is shaking confidence in the trend of lower interest rates.

As a result, the yield on the government long bond has hovered around 7%. Municipal players predicted tax-exempts would tag along, waiting to see if rates move back below 6% or break through 7.07%, the old April high.

Over the short-term, supply is also giving the market pause to consider near-term price prospects. Players were cautious yesterday ahead of nearly $7 billion of new deals, to be priced before the holiday weekend.

The caution seems warranted as new-issue bond volume continues to break last year's records.

According to preliminary figures from Securities Data Co., long-term bond volume, bonds maturing in 13 months or more, totaled $107 billion through Friday May 21, the fastest long-term bonds have broken the $100 billion mark in any year.

In 1992, long-term new-issue volume broke the $100 billion mark early in the week ended June 19. The $107 billion mark is also a 30% increase over a year ago's volume of $82.52 billion.

Looking ahead to supply, bonds in both the primary and secondary markets were more plentiful.

The Bond Buyer calculated 30-day visible supply at $8.07 billion yesterday. The Blue List of dealer inventory up for sale jumped $140 million, to $1.71 billion.

On a brighter note, some supply pressure on the New York sector was relieved yesterday. The New York State Dormitory Authority opted to wait to sell the $800 million refunding revenue bonds it had planned to sell this week.

Underwriter Goldman, Sachs & Co. said yesterday the authority decided to offer the bonds as early as next week because of a sizable number of other New York offerings slated for sale this week.

New Deals

In light new-issue action, Goldman, Sachs & Co. priced and repriced $90 million pollution control revenue refunding bonds for Forsyth, Mont., and the Montana Power Co. Colstrip Project.

The reoffering yield was lowered by about two basis points at the repricing.

A 2023 bullet maturity was priced with a coupon of 6.125%, to yield 6.217%, an original issue discount.

The offering is rated Baal by Moody's, BBB-plus by Standard & Poor's, A-minus by Fitch Investors Service, and BBB-plus by Duff & Phelps Credit Rating Co.

In short-term activity, M.R. Beal & Co. priced $72 million non-callable Massachusetts Water Resources Authority bond anticipation notes.

The offering was priced at par to yield 4% for notes due Oct. 15, 1995.

The issue is rated MIG1 by Moody's, SP-1 by Standard & Poor's, and F-1 by Fitch.

Secondary Markets

Traders reported about six bid-wanted lists totaling around $100 million circulating in the secondary yesterday, but action was dull.

Action is likely to be dull, they said, until new issues hit the primary and give traders direction.

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

In late action, California Water 5 1/2s of 2023 were quoted 5.88% bid, 5.87% offered; Texas Municipal Power MBIA 5 1/4s of 2012 were quoted 5.85% bid; 5.83% offered; and New York City 6s opf 2021 were quoted at 6.28% bid, 6.26% offered.

Washington Public Power Supply System MBIA 5.70s of 2017 were quoted at 96 3/8-1/2 to yield 5.98%; Los Angeles DEWAP 5 7/8s of 2030 were quoted at 99 3/8-5/8 to yield 5.91%; and Chicago GO FGIC 5 5/8s of 2023 were quoted at 94 5/8-95 to yield 5.98%.

In short-term note trading, yields were also mixed on the day.

In late action, California notes were quoted at 2.85% bid, 2.80% offered; New York State notes were quoted at 2.40% bid, 2.33% offered; and Texas notes were quoted at 2.40% bid, 2.35% offered.

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