Municipal prices wandered aimlessly through most of yesterday's session, with traders saying the summer doldrums caught investors and gently rocked them to sleep in the afternoon.

Tax-exempt investors were visited yesterday morning by an unfriendly guest - positive employment news.

Initial claims for unemployment benefits fell 15,000 in the week ending July 4; economists expected only a decline of 1,000.

Yesterday morning's other indicator, housing starts for June, fell 3.2%, in line with expectations.

Immediately following the news, the Treasury market slid 3/4 at the long end. But by mid-morning, most of those losses were given back, and by late in the day, the benchmark 30-year bond had actually moved 1/8 point higher, to yield 7.60%.

Traders said the jobless claims figure produced a momentary dip in tax-exempt prices. "It was really just a brief cloud that passed pretty quickly," said a trader. "It's hard to get a read on what guys are trading on right now. But it's pretty clear they are happy to be invested in municipals."

"The municipal market has been walking on thin ice at these price levels," one Chicago trader said. "We dipped as much as 1/4 point immediately following the release of initial claims, but those losses were quickly gained back."

Market participants said that municipal prices received an unexpected boost yesterday morning by the surprise announcement that Texas billionaire H. Ross Perot would not seek the Presidency.

"There was a lot of concern out there that Perot would send the election into the House of Representatives," a trader said. "His backing out has signaled to investors that there is at least a fifty-fifty chance of Bush remaining in the White House and the economy continuing its slow growth."

By the end of the day, prices were as much as 1/4 point higher in spots, with most issues ending on a positive note.

The continued bullish tone in the tax-exempt market was evidenced by The Bond Buyer's yield indexes. The 20- and 11-bond indexes each dropped one basis point, while the 30-year revenue bond index dipped three basis points from last week's all-time low of 6.36% to 6.33%.

"With new volume looking so light in the next couple of weeks, it will take more than one claims report to swing the mood of investors," said a trader. "There are some deals coming up, but they look like they'll be spread out."

Yesterday, the 30-day visible supply, as measured by The Bond Buyer, was $2.54 billion. Standard & Poor's Corp.'s Blue List stood at $1 billion.

The September municipal futures contract settled 4/32 higher, to 98.00. The September MOB spread was reported at negative 153.

New issuance was light yesterday, with few large deals priced.

The day's largest offering was an issue of $50.7 million Newport News, Va., GO refunding bonds priced by a group led by Smith Barney, Harris Upham $ Co.

The loan was divided into two sections. The first was comprised of $37 million GO improvement refunding bonds, Series 1992 B, priced to yield from 2.75% in 1993 to 5.90% in 2007.

The second part of the loan comprised $13.4 million GO water refunding bonds, Series 1992 B, with serial bonds priced to yield from 2.75% in 1993 to 5.90% in 2007.

The bonds are rated Aa by Moody's Investors Service and AA-minus by Standard & Poor's Corp.

Los Angeles GOs Affirmed

Moody's yesterday affirmed the Aaa rating on the City of Los Angeles's GOs. The affirmation was done in conjunction with the city's planned sale of $29.18 million GOs on July 21.

At the same time, the agency affirmed the Aa1 rating on the city's planned sale of Series 1992 A judgment obligation bonds, scheduled for later this month.

"The city has evidenced the ability to forge through natural and civil disturbances and responsively and responsibly finance a variety of converging events," said Diane J. Schenkman, assistant vice president of Moody's. "We feel that because of the city's position as a major financial center and its moderate debt the rating was affirmed."

In another ratings move, Standard & Poor's announced it omitted an issue from their list of California bonds downgraded on Tuesday. The agency said that $279 million California State Public Works Board lease revenue bonds series 1992 A were dropped to provisional BBB from provisional A on CreditWatch.

Secondary Trading

In secondary action, traders reported a lackluster day with little activity. Prices ended narrowly mixed.

One trader said that California GOs affected by yesterday's downgrade from AA to A-plus by Standard & Poor's moved as much as 10 basis points.

In secondary dollar bond trading, Michigan Trunk 5 3/4s of 2012 were quoted at 95 1/2-3/4 to yield 6.14%, Oklahoma Turnpike Authority 6 1/8s of 2020 were quoted at 98 3/4-99 1/4 to yield 6.22%, and New York City Water Authority AMBAC 6.20s of 2021 were quoted at 99 7/8-100 1/4 to yield 6.20%. Texas Municipal Power Authority MBIA 5 3/4s of 2012 were quoted at 95 3/8-1/2 to yield 6.15% and Salt River 5 1/2s of 2025 were quoted at 90 1/8-3/8 to yield 6.20%.

In short-term action, traders reported a quiet day, with yields remaining unchanged to slightly higher in spots.

In late action, Los Angeles Trans 3 3/4s were quoted at 3.07% bid, 3.05% offered; New York City Trans 3 1/4s were quoted at 2.92% bid, 2.87% offered; San Bernardino Co., Calif., Trans 3 3/4s were quoted at 3.15% bid, 3.10% offered; and New York State Trans 3.65s were quoted at 2.98% bid, 2.95% offered.

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