Municipals suffered more losses yesterday as supply pressure continued to mar dealers and shut some issuers out of the market.

Prices dropped 1/4 to 1/2 point on average as the correction that began Tuesday stretched into its third session.

Traders said prices tried to bounce back from the week's losses after it was reported that jobless claims rose 24,000 to a seasonally adjusted 352,000 in the week ended July 17.

But market players quickly gave up their efforts because supply pressure proved too great. "Some people tried to stick their heads up, but they got hit and ran, " a trader said. "It was a day to sit back, lick, your wounds and decide what you wanted to do. "

Weekly note and bond sales have been averaging about $9 billion recently and buyers have been scarce.

Looking ahead, some market players speculated tax-exempts will decline in price even more. Underwriters are dishing off bonds from the week's deals and dealers have been forced to mark them down in order to attract any interest from finicky investors. "We've got more pain to go through," a trader said. "We've got a big blue list and the market is still sloppy. A little more downside brings the retail bid back, but the, funds are the key. You have to watch their flow over the next week."

The Blue List of secondary dealer inventory for sale jumped $147 million, to $2.1 billion yesterday. The mark is its highest level this year and just under the high in 1992, when it reached $2.13 billion March 17.

Adding to downward pressure, the Treasury market, which had been a key support for municipals, fell for the second session in a row. Government yields rose yesterday after Federal Reserve Board Chairman Alan Greenspan hinted at a future tightening of monetary policy in the last day of his Humphrey-Hawkins testimony.

Debt futures fared better than the cash market, traders said. Short covering lent some strength and the September municipal contract settled down only 4/32 to $100.19. The MOB spread narrowed to negative 441 from negative 456 Wednesday.

Primary Market Roiled

The primary sector also continued to feel the ill effects of the downturn, and more deals were pulled or delayed.

The city of Seattle rejected bids for its $123 million Metropolitan Seattle sewer refunding revenue bond deal.

The level of savings the issuer hoped to achieve were not available because of sour market conditions, according to market sources. City officials could not be reached for comment.

Donaldson, Lufkin & Jenrette Securities Corp. had apparently won the offering with a true interest cost of 5.8718%. Lehman Brothers had the cover bid with a TIC of 5.88%.

Donaldson was reported to have reoffered serial bonds to investors at yields ranging from 2.75% in 1994 to 5.80% in 2015. A 2033 term, containing $63 million of the loan, was priced as 5.85s to yield 5.90%. Bonds from 2016 through 2020 were not formally reoffered.

The bonds were insured by the Municipal Bond Investors Assurance Corp. and rated triple-A by Moody's Investors Service and Standard & Poor's Corp.

In the negotiated sector, Reinoso & Co. said it delayed the pricing of $322 million of California Public Works Board lease revenue refunding bonds because of the ailing market.

In successful new-issue action, Equitable Securities won $79 million of Knox County, Tenn., unlimited tax general obligation bonds with a TIC of 5.16375%.

The firm reported an unsold balance of $33.4 million near the end of the day. Bonds were reoffered at yields ranging from 2.50% in 1994 to 5.50% in 2011.

The issue is rated double-A by Moody's and Standard & Poor's.

New York City is likely to postpone the pricing of a note sale until the week of Aug. 2 because of poor market conditions, a city finance official said yesterday.

The city had originally planned to sell both tax anticipation notes and revenue anticipation notes next week. The official said the delay will not hurt the city's cash position.

But the city official, who did not want to be named, said the city has reconsidered both the date and composition of the transaction following the recent deluge of short-term securities to hit the municipal market.

The increase in supply has caused market indigestion and a spike in note yields, the official said.

As a result, the city will likely sell only the Rans, which are secured with state aid payments, during the week of Aug. 2.

The city is expected to sell the Tans, secured by property tax revenues, in the fall, the city official said.

The city official said the Rans will be sold in two pieces: one that settles in April of 1994; and one that settles in June of that year.

The transaction's size has not been determined, but the total will likely be larger than $700 million, the city official said.

Last July, the city issued a total of $1.4 billion of Tans and Rans on the same day, and took advantage of market appetite for municipal securities following a record level of calls and redemptions.

In addition to market indigestion, another record level of calls and redemptions this July failed to spark the same appetite for short-term securities, the city official said. Charles Gasparino contributed to this article.

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