Prices gyrated Friday after disappointing jobs data were released, but investors began buying long-term bonds, a sign of some renewed strength in the market.

Non-farm jobs declined 57,000 in September, following a revised 128,000 loss in August, originally reported as an 83,000 drop.

But, excluding summer jobs for teenagers, September payrolls increased 40,000, reflecting an economy that is growing at a very slow pace, analysts said.

The markets traded up last week in hopes the employment report would reflect a worsening economy.

Treasury prices dropped as much as 5/8 point in disappointment. Municipals lagged, falling only 1/8 to 3/8 point.

But later, Treasuries whipsawed, retracing the losses after traders decided to focus on the still weak economy. Municipals were narrowly mixed.

Market consensus late Friday was for the Fed to wait until the Federal Open Market Committee Tuesday meeting before cutting rates.

Prices fluctuated violently in the government futures market, but municipal futures were comatose, traders said.

The December contract settled unchanged at 96.23, while the MOB spread narrowed to negative 292 from negative 305 Thursday.

Interest in Long Bonds

By mid-afternoon, traders said that crossover buyers were moving slowly cut on the yield curve, reversing a recent trend.

Investors were more inclined to view the long end as cheaper, traders said.

For most of last week, the majority of the price improvement was made in short- and intermediate-range municipal bonds, as buyers took advantage of cheap prices relative to Treasuries.

The tax-exempt long end also has been cheap relative to governments, but not enough for many investors in the early part of the week.

On the week, intermediate high-grade yields were 10 basis points lower in five to seven years; five basis points lower in the 10-year range, and 10 basis points lower in the 15-year range.

But 30-year municipal bond yields were unchanged until late Thursday, when prices began to recover somewhat.

Market players, however, say the long end may have to cheapen even more to entice investors.

Institutional buyers can afford to be prudent about buying long bonds because of the overwhelming supply, while many retail investors are sidelined by uncertainty about the presidential election, market players said.

"We need to widen the breadth of buyers," said David Johnson, high-yield fund manager at Van Kampen Merritt Inc. "October and November promise heavy issuance, and we haven't seen very many crossover buyers yet on the long end.

"The longer bonds are cheap, but still a little bit away," he said.

Triple-A long bonds in the 20-year range were calculated at 84.2% of the value of Treasuries at Thursday's close.

Mr. Johnson estimated if municipals hit 90% of Treasuries, more crossover buyers would likely enter the tax-exempt arena. Over the past 52 weeks, the high ratio was 86.5%.

Supply Flood

Market players will focus mainly on new issues this week. But prices will be susceptible to news about the presidential race, the value of the dollar, and the currency wars in Europe.

Looking to supply, a total of 9,029 issues have been priced so far this year, totaling $173 billion. That is 43.0% more than 8,067 issues priced during the same period last year, totaling $121 billion.

The Bond Buyer calculated 30-day visible supply at $8.57 billion, while The Blue List of dealer inventory fell 133.4 million, to $1.6 billion.

This week, $6.3 billion of new securities are scheduled to be priced, down from last week's total of $9.2 billion.

Weekly sales have been below the $3 billion mark only 15 times so far this year. During the same period last year, weekly sales were below $3 billion, 30 times.

Barring the ill effects of negative arbitrage on issuer savings, the bulk of this week's supply is scheduled to be priced in the negotiated sector.

The negotiated component of supply totaled $5.7 billion, while competitive deals totaled $545 million. Short-term volume totaled a paltry $69.7 million.

The negotiated sector features $450 million Massachusetts Bay Transportation Authority general transportation system revenue bonds, to be priced by Merrill Lynch & Co.; $425 million Massachusetts general obligation, Tucker Anthony Inc.; and $309 million Trinity River Authority, Tex., revenue bonds, to be priced by Dillon, Read & Co.

The competitive sector features fewer sizable deals, including $115 million Montgomery County, Md., consolidated public improvement bonds.

Friday's Secondary Markets

Traders reported increased secondary activity with a combination of bid wanteds and buyers looking for bonds, but action was short-lived ahead of the weekend.

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

Denver Airport AMT 6s of 2032 were quoted at 95 5/8-3/4, to yield 7.20% on the bid-side; Puerto Rico Electric Power Agency 6 1/4s of 2017 were quoted at 97 1/2-98, to yield 6.453%; and Chicago AMBAC 5 7/8s of 2022 were quoted at 93-1/2, to yield 6.404%.

Puerto Rico GO 6s of 2014 were quoted at 95 5/8-7/8, to yield 6.374%; New York City Water Authority 6s of 2017 were quoted at 93 1/8-3/8, to yield 6.565%; and Los Angeles Department of Water and Power 6s of 2032 were quoted at 95 3/4-96, to yield 6.29%. Florida Board of Education 6s of 2025 were quoted at 95 3/4-7/8, to yield 6.308%.

In the short-term sector, yields were quoted down five to 10 basis points on the day and 25 to 30 basis points on the week.

In late trading, California Rans, Los Angeles Trans, New Jersey Rans, and Pennsylvania Tans were quoted at 2.60% bid, 2.55% offered. Texas Trans and Wisconsin notes were quoted at 2.65% bid, 2.65% offered; and New York State Trans were quoted at 2.75% bid, 2.70% offered.

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