Players tested the market's resolve yesterday, and the clash produced lower prices and decidedly mixed new issue results.

The market opened lower for a second consecutive session and the recent bullish trend appeared to be in the process of reversing itself. Prices suffered their first major drop Tuesday after news of a surprise jump in consumer prices in August. The market failed to bounce back yesterday as many bad hoped and disappointed players traded bonds even lower.

"People were discouraged the market did not rebound," a trader said early yesterday. "It seems like the long overdue correction is beginning and we're wondering where the bottom is going to be if the Treasury 30-year bond cannot hold 6%."

Tax-exempt prices declined 3/8 to 1/2 point by mid-morning amid steady selling in the secondary, traders said.

But government traders managed to find some buyers just through 6% on the long bond and that. combined with short-covering, managed to stabilize the market at the lower levels. Municipals, meanwhile, settled down 1/4 to 3/8 on the day, but some bonds made it back to unchanged.

In the debt futures market, the December municipal contract hit a low of 104.06, but settled unchanged at 104.22. The MOB spread narrowed to negative 457 from negative 454 on Tuesday.

Traders reported a steady flow of bid-wanteds in the secondary, although bid lists did not indicate widespread liquidation.

Reflecting the selling activity, The Blue List rose $120 million Wednesday to $1.22 billion from Tuesday's $1.1 billion. The list has risen for four consecutive days, from $874 million on Sept. 9, and is at its highest level since Sept. 3 when it totaled $1.23 billion.

But forward supply, as compiled by The Bond Buyer, remained anemic, falling to $3.49 billion yesterday.

New Issues

Underwriters reported mixed results on new issues, with some repriced to lower yields and others cheapened.

Topping negotiated pricings, a syndicate led by Lehman Brothers priced, repriced and restructured $333 million Illinois ~Build Illinois' sales tax revenue bonds.

At the repricing, a 2010 maturity was added to the serial bond scale, while reoffering yields were raised by five basis points from 2000 through 2009 and on the term bonds.

The deal will give Illinois an estimated present value savings of $15 million, according to Mike Colsch, division chief of economic analysis and debt management for the Illinois Bureau of the Budget. About $75 million of new money was included in the issue, Colsch said.

The final offering included serial bonds priced to yield from 2.60% in 1994 to 5.15% in 2010. A 2013 term, containing $62 million, was priced as 5 1/4s to yield 5.37%, and a 2018 term was priced as 51/4s to yield 3.45%.

The Illinois bonds are rated Aa by Moody's Investors Service and AAA by Standard & Poor's Corp.

Lehman also priced and repriced $175 million general obligation bonds for the government of Guam.

At the repricing, term bond yields in 2013 were lowered by about two basis points, while yields in 2018 were cut by three basis points.

The final offering included serial bonds priced to yield from 3% in 1994 to 5.30% in 2008. A 2013 term, containing $42 million, was priced as 5 3/8s to yield 5.436% and a 2018 term, containing $55 million, was priced as 5.40s to yield 5.47%.

The bonds are rated BBB by Standard & Poor's.

Merrill Lynch & Co. priced and repriced $105 million hospital system revenue bonds for Wake County, N.C. At the repricing, zero coupon bond yields were lowered by five basis points. There were $99 million current interest bonds priced to yield from 3.50% in 1996 to 5% in 2007. Term bonds in 2013 and 2014 were priced as 5 1/8s to yield 5.25%; a 2018 term was priced as 5 1/8s to yield 5.30% and a 2026 term was priced as 51/8s to yield 5.35%. There also was $6 million capital appreciation bonds, priced to yield 5.25% in 2008, 5.35% in 2009, and 5.40% in 2010.

The Wake County bonds are insured by MBIA and rated triple-A by Moody's and Standard & Poor's.

In competitive action, Goldman, Sachs & Co. won $124 million University of Maryland System auxiliary facility and tuition revenue refunding bonds, bidding a true interest cost of 4.8011%.

Goldman reported an unsold balance of $26 million near the end of the session.

Serial bonds were reoffered to investors at yields ranging from 2.50% in 1994 to 5.10% in 2014. Bonds from 2003 through 2007 were not formally reoffered.

The Maryland System issue is rated Aa by Moody's. AA-plus by Standard & Poor's, and AA by Fitch.

Elsewhere, $100 million New Jersey Health Care Facilities Financing Authority revenue bonds was won by Merrill Lynch with a TIC of 4.987840%.

The firm reported an unsold balance of $41 million late in the day.

Serial bonds were reoffered at yields ranging from 3.20% in 1995 to 5.15% in 2013. Term bonds in 2016 and 2021 were not formally reoffered.

The bonds are MBIA-insured and rated triple-A by Moody's and Standard & Poor's.

In short-term new issue action, First American Municipals Inc. tentatively priced $95 million Suffolk County, N.Y. tax anticipation notes.

The non-callable securities, due Nov. 15, 1994, were priced with a coupon of 3% to yield 2.85%.

The issue is rated MIG-1 by Moody's.

Secondary Markets

Traders reported steady selling during the morning session, but action quieted after the Treasury market stabilized in the afternoon.

In secondary dollar bond trading, prices were quoted unchanged to down as much as 1/2 point, traders said.

In late action, South Carolina PSA FGIC 5s of 2025 were quoted at 5.34% bid, 5.33% offered; Washington Public Power Supply System 5 3/8s of 2015 were 5.58% bid, 5.55% offered; and Florida MPA AMBAC 4 1/2s of 2027 were 88 1/2-3/4 to yield 5.22%.

Jacksonville Electric 5 1/4s of 2021 were quoted at 5.37% bid, 5.35% offered; New York State Power Authority 5 1/4s of 2018 were at 99 7/8-100 1/8 to yield 5.25%; and Florida State Board of Education 5 1/4s of 2023 at 98 1/2-99 to yield 5.35%.

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