For the first time in almost a year, New York City could get a warmer and less expensive reception in the municipal market as it sells $750 million of general obligation bonds today.

According to a consensus pricing scale released yesterday, tax-exempt serial bonds due 2012 through 2021 could be priced to yield 8.20% -- potentially the lowest rate the city has paid since the market turned against them during the first two weeks of October. The last city deal that saw a yeild below 8.25% on its long-term, fixed-rate bonds was in September 1990, when Bear Stearns & Co. priced an $850 million deal with a maximum yield of 8.05%.

Merrill Lynch & Co., one of the city's five senior managers, is book runner for today's offering.

The last time the city came to the bond market was in June, when Goldman Sachs & Co. served as senior manager, and tax-exempts were priced on the long end to yield 8.55%.

The is the city's first bond sale in fiscal 1992, which began on July 1. Last week, the city successfully sold $1 billion of tax-anticipation notes.

Most traders said the bond deal would find plenty of investor interest at the 8.20% yield. Standard & Poor's Corp. rates the issue A-minus, but it is on negative outlook.

Moody's Investors Service has rated the city's outstanding bonds Baa1, and is expected to release an updated ratings analysts today.

"People love it right now," one trader said. "There's been cash waiting around for this deal. The dealers are light on bonds and it won't have any problem."

"This is a much stronger scale than the last time. It makes sense," said one underwriter in the city's bond syndicate. He also noted that the municipal market in general has improved dramatically over the last few weeks. The Bond Buyer 20-Bond Index was listed at 6.99% last Thursday, down from 7.19% on June 13.

And the prices of city bonds have improved over the last few weeks as well, riding the coattails of the improving municipal market, traders said.

Market participants said other factors played a role in the improvement in city bond prices as well, including the city's adoption of a budget on time and remaining out of the clutches of the New York State Financial Control Board, a fiscal monitor empowered to take over the city if conditions warrant.

One trader attributed part of the demand to dealers looking to get city bonds with relatively high yields compared to other single-A credits. "The rumor is that dealers should get city bonds while they are still unenhanced and they have a little yield to them."

He noted the city plans to refund $1 billion of credit-enhanced bonds in late September or early October in order to free up enhancement capacity for future city deals. Using bond insurance reduces borrowing costs by lowering the yields on insured bonds.

An investment banker said the market for city bonds has improved because there has not been a lot of dumping of city bonds in the weeks leading up to the sale, adversely affecting their prices in the secondary market.

"They did not back up, there is no bluffing going on now," the banker said.

In addition, the banker said the city's fiscal plight has at least improved and added that she believes "there is not going to be a single bad headline until October," when updated reports on the city's fiscal situation could possibly indicate problems.

While there appears to be a traffic jam of demand for the city's offering, at least one major institutional investor has admitted he will stay on the sidelines because the deal is not cheap enough.

James L. Gammon, senior vice president and senior portfolio manager for Loews Corp., said, "They have gone a little bit too far for us. I think we will let other people play this time.

"The whole bond market is too high and we are willing to wait for yields to adjust," he noted. Mr. Gammon has participated in all of the city's bond offerings in the last year, benefiting from the high yields by selling his holdings into improving markets.

Included in the city bond sale is its first offering of zero coupon bonds. The city was authorized to sell the securities this summer, after the state Legislature amended the state's local finance laws. The city has been selling zeros through its bond syndicate in the secondary market. About $78 million of the tax-exempt bonds, with maturities in 1999, 2000, and 2001, are structured as zeros. Another $10 million will sold as zero taxable bonds, and about $40 million of current coupon GOs will be sold as taxable bonds.

Staff reporter Sean Monsarrat contributed to this article.

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