Municipals ended unchanged to slightly better in a session a seasoned trader labeled "a yawner," but one economist thinks yesterday's yawns could become today's groans if the July employment report comes in as he expects.

"It's just as dead as a doornail," said Thomas Daly, a senior vice president and director of Legg Mason Wood Walker Inc.'s municipal bond department, concurring with the trader.

"The market is pretty much flat," Daly said. A municipal analyst said prices for high-grades improved slightly through the intermediate range, while dollar bonds rose about 1/8 point. Most of the improvement was seen in the afternoon. Yesterday's September MOB spread was negative 398, compared with negative 396 on Wednesday.

Daly, and other traders as well, said some customer lists were out for the bid yesterday morning. While roughly two-thirds of the bonds on the lists traded, most seemed to end up in dealers' hands, Daly said.

"The things that traded, they really haven't found a home for them yet," he said.

Though yesterday's market saw "very little" activity from institutional accounts, some retail business got done during the morning. That tapered off during the afternoon as participants looked ahead to the weekend. With summer in full swing, the real activity gets done on Tuesday, Wednesday, and Thursday, he said.

Municipals showed little reaction yesterday to news that first-time claims for state unemployment insurance dropped 10,000 to 319,000 for the week ended July 29.

As for today's July employment report, Daly thinks its unlikely to substantially move the market unless it contains unusually favorable or unfavorable news.

"I think it would take a real shock to get the reaction we saw a month ago," he said. Duly was referring to last month's June employment report which reflected a 379,000 nonfarm jobs increase and triggered a sell-off.

The consensus forecast for July calls for increase of 200,000 nonfarm payroll jobs. Forecasts range from an increase of 100,000 to 300,000.

But John Lonski, senior economist at Moody's Investors Service, sees a 250,000 increase in non-farm jobs. He also warns that today's data likely understates the true jobs picture by 50,000 to 100,000 because of an unusually short reporting period.

Lonski also expects a longer work week and an increase in hourly wages. If he's right, "we will probably see a pronounced sell off of bonds," he said.

In addition, a 250,000 increase in non-farm jobs would likely prompt the Federal Reserve to tighten monetary policy by the time of its Aug. 16 Federal Open Market Committee meeting, he said. Such an increase would likely trigger a 50-basis-point hike in both the federal funds rate and the discount rate, Lonski said. Even an increase of as few as 200,000 non-farm jobs may be enough to move the Fed if it feels "the shortened observation period has understated the underlying strength of employment conditions," he said.

In competitive action yesterday, a Merrill Lynch & Co. group won $250 million Florida State Board of Education public education capital outlay bonds with a true interest cost of 5.99%.

CS First Boston had the cover bid with a TIC of 6.0058%; Bear, followed by Bear, Stearns & Co. with 6.0247% and Smith Barney Inc. with 6.0402%.

The offering had been on the forward calendar on 24-hour notice since July 25, according to Tim Tinsley, Florida's interim director of bond finance. While the deal was first announced on July 15, the state's 10-day advertising requirement made July 25 the first time the issue was eligible for sale.

The bonds were reoffered to investors at a maximum yield of 6.15% in 2024. The deal received double-A ratings from Moody's Investors Service, Standard & Poor's Corp and Fitch Investors Service.

"They bumped that a little bit," a municipal analyst said, adding that if the market starts pricing off the Florida Eds scale things should bode well for the cash market.

Tinsley said he had heard that yields were lowered on some of the serial bonds. He said he was "very pleased" with the bids the state received for the bonds, he said.

"We're just happy they got [a TIC] under 6%," Tinsley said. While municipals haven't improved as much as Treasuries of late, Tinsley said the have exhibited a better tone. Given that, Florida decided to bring the deal ahead of today's employment report rather than risk a possible downturn.

According Delphis Hanover Corp., comparable municipals are currently trading at 82.1% of 30-year Treasuries. That ratio compares to a low of 79.6% set on June 15 and the high ratio of 88% reached on Nov. 9, 1993.

The ratio has remained in the low 80s for about a month now. Analysts have noted that when a sub-80% ratio has been in effect for a a couple of days or so, the usual result is a downward adjustment in municipals.

In other news yesterday, New York State Gov. Mario M. Cuomo and city mayor Rudolph Giuliani announced that the Battery Park City Authority will issue bonds to finance the construction of a new headquarters for the New York Mercantile Exchange.

The authority will build the headquarters at Battery Park City in lower Manhattan. The project will be financed in part through the sale of authority bonds, supported by the exchange's lease agreement with the authority. Details on the bonding were not available yesterday, but Wall Street sources say the authority will issue about $100 million in securities.

Charles Gasparino contributed to this column.

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