New issue long-term municipal bond volume continued to take a pounding, dropping to $89.18 billion in the first half of 1994, down 40% from $149.13 billion a year ago, according to information from Securities Data Co.'s data base.

When the second quarter of 1994 began, the municipal bond market was already suffering from the effects of the Federal Reserve Board's incremental increases in the federal funds rate. The troubles were exacerbated by uncertainty over inflation and the beating that the U.S. dollar took in overseas markets. The quarter ended badly, amid reports of a growing economy that resurrected the specter of inflation.

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