Municipal prices were unchanged in lackluster activity Friday as the market continued to show strength in the face of formidable supply.

The producer price index for finished goods declined 0.2% in July after a 0.3% drop in June. The core rate of inflation came in up 0.2%, meeting market expectations.

Cash prices were unchanged on the news, but in the debt futures market the September contract settled up 3/32, to 92.28.

Traders reported very little activity Friday, and the market essentially closed by early afternoon.

The market ambled through record supply last week with most bonds going to permanent investors. As a result, secondary activity was subdued and traders predicted more of the same this week.

Short-term trading was also lackluster, with yields unchanged or slightly higher due to inactivity.

The Series A California March notes were quoted near the end of cash trading at 4.62% bid, 4.58% offered, which was originally priced at a 4.65% net. The Series B June notes were quoted at 4.70% bid, 4.67% offered, but they were originally offered to investors at a 4.75% net.

In other secondary trading, New Jersey notes were quoted at 4.65% bid, 4.62% offered. Traders said there was $80 million March New York State Trans out for the bid and traded right around 5.03%. New York City notes were quoted at 4.70% bid, 4.65% offered.

Prerefunded bond levels were also unchanged on the day in quiet trading. Prerefunded bonds with national names, callable in 1995, were quoted at 5.58% bid, 5.55% offered, while bonds callable in 1996 were quoted near the end of cash trading at 5.64% bid, 5.60% offered.

On Tuesday, the Labor Department reports the consumer price index for July. On Wednesday, real earnings and manufacturers sales and inventories for June will be reported along with manufacturers sales and inventories for June. Thursday, jobless claims for the week ending Aug. 3 are due out, followed by July's housing starts.

Friday, the Federal Reserve reports on industrial production and capacity utilization for July.

The market faces another formidable new issue calendar this week. The new-issue slate totals $4 billion.

The 30-day visible supply totaled $4.51 billion on Friday, up $559 million from Thursday's levels, but down $870 million from last Friday.

Standard & Poor's Corp,'s The Blue List was back over $1 billion Friday, to $1.03 billion, an increase of about $54 million from Thursday, but down $320 million from a week ago.

The negotiated sector features most of the sizeable issues this week, including $640 million of Washington general obligation refunding bonds, to be priced by a Smith Barney, Harris Uphan & Co. group; $379 million of Ohio Housing Finance Agency housing revenue bonds, to be priced by Lehman Brothers; and $136 million of Michigan Municipal Bond Authority local government loan program revenue bonds, to be priced by Kemper Securities Group Inc.

The competitive sector features $1.2 billion of California various purpose general obligation bonds.

The short-term note sector features $150 million of Maine tax anticipation notes, to be priced by Prudential Securities.

In other news, the New York State Environmental Facilities Corp. this month will sell its first competitive bond offering under the state revolving loan program it oversees.

The corporation is selling $48 million of revenue bonds on Aug. 20 through a competitive auction, said Terry Agriss, president of the corporation. Proceeds from the sale will be loaned to Westchester County.

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