Tax-exempts outperformed Treasuries yesterday, but the tone was uncertain and the markets failed to hold onto new highs.

The 30-year Treasury bond opened with gains and struggled to a new price high by mid-session.

On Friday, the long bond closed for the third time in five days at 6.66%, the lowest closing yield recorded since the Treasury began issuing 30-year bonds regularly in 1977.

The long Treasury bond yield hit an intra-day low of 6.62% yesterday, while municipals posted 1/8 to 1/4 point gains in light trading.

But a jump in the Commodities Research Bureau index pushed the markets off their pinnacle.

The CRB was quoted at a high of 217.04, up 5.03 by mid-afternoon, making market players wary of buying long bonds at such lofty prices.

By session's end, tax-exempt dollar bond prices were still quoted unchanged to 1/8 to 1/4 point higher in sympathy with the government market's early surge.

In the debt futures market, the September municipal contract settled down 8/32 at 102.08.

Tax-exempts outperformed Treasuries, and the MOB spread narrowed to negative 367 from negative 373 Friday.

The weakness in the futures contract shook market players confidence in the prospect of higher cash prices in the near-term.

Increased demand from massive July 1 bond calls and shrinking supply have long been expected to push prices higher at least through July.

But market players began to doubt their bullish outlook in the face of higher commodities prices and rumors of sizable deals coming down the road, including a large Georgia offering.

Reflecting the market's inability to make headway, bids for bonds from a $300 million Florida Board of Education deal, sold last week, weakened on the day. Bonds from the offering that traded in the morning at the original net, less 1/2 point, were quoted at the original, less 5/8 point, near the end of the session, traders said.

The 30-day visible supply fell to $4.48 billion yesterday, from $4.59 billion Friday. The Blue List of secondary dealer inventory slipped $45.8 million, to $1.72 billion.

The 30-day visible supply has been under $5 billion for five consecutive days, after averaging $6.42 billion through July 6. The total has not dipped into that range since the Feb. 9 - Feb. 19 period, when the 30-day ranged from a low of $3.28 billion to a high of $4.84 billion.

Only about $3 billion of bonds and notes are expected to be priced this week.

In very light negotiated new issue action yesterday, Smith Barney, Harris Upham & Co. tentatively priced $44 million Leon County School District, Fla., general obligation refunding bonds.

The offering included serial bonds priced to yield from 2.65% in 1994 to 5.40% in 2009.

The issue is rated A 1 by Moody's Investors Service and A-plus by Standard & Poor's Corp.

Today's slate is expected to include $230 million revenue refunding bonds, to be priced for the Inter-mountain Power Agency, by Goldman, Sachs & Co.

Market players yesterday said they expected the long end of the IPA loan to be priced as 5s to yield 5.58% to the par call.

Goldman is also expected to price $400 million New York State Local Government Assistance Corp. refunding revenue bonds, while Smith Barney will price $161 million Mississippi student loan revenue bonds.

Secondary Markets

Traders reported some business flow, but action was dull overall.

In secondary dollar bond trading, MBTA MBIA 5 1/2s of 2022 were quoted at 98-1/8 to yield 5.64%; Pennsylvania COP AMBAC 5s of 2015 were at 92 1/4-5/8 to yield 5.61%; and Puerto Rico Public Improvement 5 1/4s of 2018 were quoted at 94 1/2-7/8 to yield 5.66%.

Omaha PPD 5 1/2s of 2017 were quoted at 98 5/8-99 to yield 5.60%; Seattle Light 5 3/8s of 2018 were quoted at 96 3/8-97 to yield 5.64%; and Orange and Orlando FGIC 5 1/2s of 2018 were quoted at 5.61% bid, 5.58% offered.

In short-term note trading, yields were five to 10 basis points lower on the day, traders said.

In late action, New York State Trans were quoted at 2.07% bid, 1.90% offered, and Wisconsin notes were quoted at 2.50% bid, 2.45% offered.

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