Municipals were mixed in dull trading yesterday, while new competitive issues were bid aggressively through the intermediate maturity range:

The credit markets opened with a bullish tone. but profit-takers took out any, gains after a stronger than expected gross national product report.

The U.S. economy grew at a modest annual rate of 1.8% in the second quarter, up slightly from the 1.6% gain estimated last month. the Commerce Department said in a revised estimate.

While there were some pockets of strength in the latest report, market analysts generally said it showed that the economy continued to limp along. However, they said the report contained enough strength for the Fed to remain steadfast on monetary policy.

After the early flurry, trading was lackluster for the remainder of the session as market players refused to take a big risk with yields at record lows.

"You're only working for one or two basis points on a trade so there's no satisfaction," said one trader. "It doesn't pay to have bonds on board because there's no reward for the risk you're taking."

By session's end, prices were quoted unchanged to 1/8 point higher overall. Some gains were made after the Treasury long bond was traded marginally higher on the day.

The gains were enough for The Bond Buyer Municipal Bond Index to set another record high yesterday. rising 1/2 to 104.04, pushing the average yield to maturity to a record low of 5.60%.

In the debt futures market, the September municipal contract settled down 5/32 to 104.05. The MOB spread widened to a new record low. hitting negative 497 from negative 487 on Monday.

The credit markets also received more evidence of a weak economy. but the reports were overlooked.

The Chicago Purchasing Management Association's Index of Business Activity crept up to 50.2 in August on a seasonally adjusted basis from a reading of 50.1 in July. An index reading below 50 signals a slowing economy, while a level above 50 suggests expansion.

Consumer confidence in the U.S. economy remained stalled in August, dampened by expectations for the next six months, the Conference Board said.

The board's confidence index dipped to 59.0 in August from a revised 59.2 in July. The board originally reported July's index at 57.7.

Looking ahead to supply, The Bond Buyer calculated 30-day visible at $2.78 billion, the lowest level since Dec. 22, 1992, when it was $2.52 billion.

Secondary supply has also decreased, as reflected in The Blue List of dealer inventory, which fell $10.5 million yesterday, to $1.5 billion.

New Deals

Competitive offerings dominated new issue action yesterday, and dealers bid aggressively for the new paper through the intermediate maturities, players said.

J.P. Morgan Securities Inc. won $466 million University of California Board of Regents refunding revenue bonds with a true interest cost of 5.3772%. The firm reported an unsold balance of about $113 million late in the day.

Bank of America had the only other bid on the deal, with a TIC of 5.4258%.

A 2016 term was priced to yield 5.40%; a 2018 term was priced to yield 5.40%; a 2019 term was not formally reoffered; and a 2023 term, containing $121 million, was priced to yield 5.38%.

The bonds are insured by the AMBAC Indemnity Corp. and rated triple-A by Moody's Investors Service and Standard & Poor's Corp.

Elsewhere in the competitive sector, Merrill Lynch & Co. won $225 million Florida State Board of Education public education capital outlay bonds with a true interest cost of 5.255%. Merrill reported an unsold balance of $25 million late in the session.

Serial bonds were reoffered to investors at yields ranging from 2.55% in 1994 to 5.33%. Term bonds in 2019 were reoffered at 5.371 % and a 2023 term was priced to yield 5.394%. The issue is rated double-A by Moody's and Standard & Poor's.

In light negotiated new issue action, Lehman Brothers priced $203 million Omaha Public Power District electric system revenue bonds.

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

The offering included serial bonds priced to yield from 2.70% in 1994 to 5.15% in 2008. A 2013 term, containing $63 million, was priced as 51/4s to yield 5.35%, and a 2016 term was priced as 5.30s to yield 5.40%. The bonds are rated double-A by Moody's and Standard & Poor's.

Traders reported very little business flow, with only spotty action centered around specific situations.

Secondary Markets

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

New York Power Authority 5 1/4s of 2018s were quoted at 983/4-99 to yield 5.34%; Los Angeles Convention Center MBIA 5 1/8s of 2021 were quoted at 5.43% bid, 5.42% offered; Philadelphia Water Capital Guaranty 5 1/2s of 2014 were quoted at 99-1/4 to yield 5.58%.

Rhode Island Convention Center MBIA 5s of 2020 were quoted at 5.52% bid, 5.50%; Michigan Building Authority AMBAC 5.30s of 2016 were quoted at 5.43% bid, 5.41% offered; and Charlotte COP AMT AMBAC 51/4s of 2020 were quoted at 5.43% bid, 5.40% offered.

In the short-term note sector, yields were four to seven basis points higher on the day, traders said.

In late action, California notes were quoted at 2.77% bid, 2.74% offered; Los Angeles notes were quoted at 2.77% bid, 2.74% offered; and New York State notes were quoted at 2.55% bid, 2.50% offered.

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