Municipals ended 1/8 point higher in a quiet Friday session as participants tried to decide whether the current uptick is real, or just a bear in bull's clothing.

"Most people are wondering whether this a bottom or just an uptick in a down market," one municipal trader said.

Anyone who has tried to pick the turning point since the market began its more than 200-basis point slide a year ago has gotten badly hurt, he said.

The Treasury's 30-year bond closed at a yield of 7.82% Friday, compared with a 5.78% closing yield on Oct. 15, 1993.

"So is everybody proceeding with caution? Yes, as well they should be," the trader said.

Dollar bonds Friday were up 1/8 point overall, to 1/4 point higher in spots, while yields on high-grade issues improved slightly. In debt futures, the December municipal contract closed up 6/32S to 87 13/32S. Friday's December MOB spread was negative 382, compared with negative 381 on Thursday.

Bid lists, which ran rampant Thursday, slowed on Friday, participants said.

A portfolio manager who runs several funds estimated that more that $700 million of bid lists, mostly from mutual funds, hit the market on Thursday.

"I think there's rough sailing still," he said Friday, pointing to the amount of bid lists last week."

It's not clear, though, what is triggering the selling, he said. Funds may be selling to make room for new issues, or they could just be trying to raise cash levels, the portfolio manager said.

"I think it might be a little bit of tax selling, but whether it's just a matter of increasing cash levels, tax swapping, or something else, I'm not sure," he said.

Despite his cautious view of the market, he continues to shop.

"We're always looking for things that are attractive, but at the same time, we're always looking to sell things in our funds where we can get a good price for them," the portfolio manager said.

He added that while funds may be sellers these days, the retail bid continues to be strong.

"Obviously, that's not for a block of $10 million, but if you can find the. right block of bonds that fits a retail inquiry, you can sometimes get a good sale off, but more in the range of $1 million at a time," he said.

Kathleen Camilli, chief economist at Maria Fiorini Ramirez Inc., attributed the gains in the Treasury market to reports Friday on consumer prices and industrial production in September, which the market regarded as favorable.

"The market kind of ignored stronger-than-expected retail sales," she said.

The consumer price index rose 0.2%, industrial production was unchanged, and capacity utilization fell 0.2% to 84.6%. Retail sales increased by 0.6% in September.

Despite the market's gains, Brian Wesbury, chief economist at Griffin, Kubik, Stephens & Thompson Inc., said Friday's numbers tell him inflation continues to accelerate modestly.

"While [Thursday's] decline in the [producer price index] was like a bucket of cold water on inflationary fears, [Friday's] numbers show that at least in my view there's a number of smoldering ashes still remaining," Wesbury said.

"With capacity utilization at 84.6%, we still have to remain very alert to the potential for a bottleneck type of situation in the economy, which can lead to price pressures," he said.

Wesbury noted that one of the main reasons for the weaker-than-expected reading on industrial production and the decline in capacity utilization was the drop in auto production. The decline in production was due mainly to strikes, which casts some doubt on Friday's data, the economist said.

"It also suggests that October's production number should bounce back as auto producers play catch up," Wesbury added.

Retail sales, meanwhile, were rising at an annual rate of 7.4% in the third quarter. "That's much stronger than we saw earlier this year," Wesbury said.

Looking ahead to this week's new issues, the negotiated calendar features four issues totaling $100 million or more. Topping the list is a $245 million Indianapolis Airport Authority special facilities revenue bond offering through CS First Boston.

Also included are $162.8 million of Maryland Transportation Authority special obligation revenue bonds, and $102.9 million of Guam Power Authority revenue bonds. Morgan Stanley & Co. will serve as senior manager on both of those deals.

The Connecticut Housing Finance Authority is offering $100 million of revenue refunding bonds through CS First Boston.

As for competitives, the San Francisco City and County Airport Commission is expected to sell $125 million of revenue bonds on Tuesday. Also that day, Salem County, N.J., is slated to sell $92.9 million of pollution control finance authority refunding revenue bonds.

The 30-day visible supply of municipal bonds totaled $3.01 billion Friday, up $374.7 million from Thursday. That comprises $1.471 billion of competitive bonds, up $36.8 million from Thursday, and $1.539 billion of negotiated bonds, up $338 million.

Standard & Poor's Blue List of municipal bonds was down $23.1 million yesterday to $1.94 billion.

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