The new-issue market took a breather yesterday after Tuesday's close to $3 billion marathon.

By late yesterday, just three federal agency deals totaling $848 million were priced. One trader cited yesterday's backup in interest rates and the Treasury's 10-year auction as reasons for the thin supply.

Despite Tuesday's large tally, few signs of indigestion were evident yesterday, traders said.

"All the deals have been received fairly well," said Phil Kazlowski, head corporate trader at Citicorp Securities Inc.

Kazlowski said both tranches of U S West Communications' two-part $400 million offering were trading in the secondary market at where they were priced originally on Tuesday.

"So the market took those deals pretty well," he said.

U S West sold $150 million of noncallable notes due 2005 and $250 million of debentures due 2043, which are noncallable for 20 years. Kazlowski said that the telephone sector is witnessing a structural change from the typical 30-year and 46-year deals that are noncallable for 10 years. Recently, the market has been seeing 40-year and 50-year deals that can't be called for 20 years. The reason: accounts are demanding more call protection, Kazlowski said.

Another high-grade source said Tuesday's barrage was a reaction by issuers to the favorable rates created by the unexpected decline in the producer price index for October. But other recent numbers have caused some fear that the last hurrah for interest rates may be at hand. The Labor Department yesterday reported that consumer prices climbed 0.4% in October. The figure was in line with market expectations.

"There is a lot of concern with the numbers," the high-grade source said. She said she expects issuers with business to do in the fourth quarter to accelerate it. The acceleration will make for a busy calendar in the near term, tapering off into the holiday season, she said.

The source doesn't anticipate big volume, however. Many issuers, particularly industrials and utilities, have completed their business for this year, she said.

In secondary market action, one high-grade source said RJR Nabisco Inc. paper has tightened substantially in the past week to week and a half

"I just bought some today," one trader said, adding that he had stayed away from the credit for a while.

The company's 10-year paper has tightened to a spread of roughly 350 basis points more than comparable Treasuries from about 390 more than a week to a week and a half ago, he said.

A favorable Merrill Lynch & Co. research report and RJR's plan to raise cigarette prices contributed to the tightening, the source said.

While RJR has a BBB-minus rating from Standard & Poor's Corp., the market expects it to be downgraded to a strong double-B, he said. But, even as a double B, "they are trading cheap to those levels," he said.

Citicorp's Kazlowski said that bonds of TeleCommunications Inc., Time Warner, and Newscorp appeared to have stabilized following their big moves triggered by last month's Bell Atlantic Co., TCI, and Liberty Media merger plans announcement. For instance, TCI 10-year debt was trading in a range between 94 and 90 yesterday, exactly where it was a week ago. Prior to the announcement, it was trading between 165 and 160, he said. Spreads on corporate bonds overall were largely unchanged.

High-yield bonds were unchanged yesterday in quiet trading as many participants attended a Donaldson, Lufkin & Jenrette Securities Corp. conference. Held at the Mirage hotel in Las Vegas, the conference started yesterday and will run through Friday. it will feature presentations from 60 high-yield companies, a Donaldson Lufkin spokeswoman said.

New Issues

Federal National Mortgage Associations issued $600 million of 5.23% medium-term notes due 1998 at par. Noncallable for three years, the notes were priced to yield 18 basis points more than comparable Treasuries. Merrill Lynch was the lead manager on the offering.

Federal Home Loan Banks issued $198 million of 5.30% notes due 1998 at par. Noncallable for a year, the notes were priced to yield 25 basis points more than comparable Treasuries. First Chicago Capital Markets managed the offering.

Federal Home Loan Banks reportedly issued $50 million of 5.72% notes due 2000 at par. Noncallable for three years, the notes were priced to yield 45 basis points more than comparable Treasuries. Citicorp Securities Inc. managed the offering.

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