Municipals ended unchanged to 1/8 point higher yesterday after the bludgeoning administered by Friday's economic data

The market is "a little stronger than it was on Friday," one municipal trader said. "The bid side just got really ugly on Friday."

The trader cited New Jersey 5 5/8s of 2005, which went from a 5.50% bid on Thursday to a 5.65% bid on Friday. They were still at a 5.65% bid yesterday, he said. Helping yesterday's market was the limited amount of bid lists. the trader said. Another trader said that while lists were out, they were manageable. In light secondary activity, yields on highgrade issues remained unchanged, while dollar bond prices rose 1/8 point, a municipal analyst said. In the government market. the 30-year bond closed up nearly 1/8 point to 7.75%.

In debt futures. the December municipal contract closed up 10/32s to 88 10/32s. Yesterday's December MOB spread was negative 364, compared to negative 360 on Friday.

On Friday; the market learned that industrial production jumped to 0.7% in August after rising 0.3% in July. Capacity utilization was up 0.4% in August to 84.7%, marking the highest level since April 1989.

Robert W. Chamberlin, senior vice president and supervisory municipal analyst at Dean Witter Reynolds Inc., noted that Friday's drop marked the bond market's third tough Friday in a row. On Sept. 2, the market dropped despite a better-than-expected August employment report. On Sept. 9, a bigger-than-expected jump in the August producer price index sent both municipals and governments sharply lower.

"I think the big thing is going to be what happens this Friday," Chamberlin said, adding that with little on the economic calendar, the market won't have a statistical reason to fall. The analyst also noted that before Friday's plunge, bonds had finned a bit on the week's earlier economic indicators, including the consumer price index, retail sales, and business inventories.

While little market-moving data is ahead this week, next week contains reports on consumer confidence and durable goods reports, as well as personal income and consumption. The week of Oct. 3 features the leading indicators report on Tuesday, and culminates with the most important number on the horizon, September employment.

As for this week, "we're modestly constructive," Chamberlin said. While the market may not have reached a bottom, it's close enough to one that it can afford to look up a bit, he said. Friday's drop combined with the previous Friday's PPI-induced plunge assures that another hike in short-term interest rates is built in, removing that uncertainty from the market.

An increase in supply, the lack of which has plagued the market for some time, along with a belief among retail investors that municipals are cheap, should help the taxexempt market this week, Chamberlin said.

"You can't sell what you don't have, and the market continues to be very picky," the analyst said. Not only do retail buyers want specific names, they want bonds with 20-year call protection, he said.

Several of last week's new deals had balances, Chamberlin said, and while underwriters won't like the fact that they have to cheapen them up, it enhances buyers' selection. In addition, last week also saw a "substantial" amount of bid lists out, he said.

Turning to this week's negotiated fare, the Puerto Rico Municipal Finance Agency is expected to bring a $250 million revenue bond offering through CS First Boston today. A $173 million New York State Medical Care Facilities Finance Agency offering, which was listed for this week, is now on a day-to-day basis.

On the competitive side, Nashville and Davidson Counties Metropolitan Government, Tenn., is expected to sell $150 million of bonds today, while Connecticut is expected to sell $200 million of Series B transportation infrastructure purpose special tax obligation bonds on Thursday. Also on Thursday, Illinois is slated to sell $135 million of sales tax revenue full faith and credit bonds.

In other news, the 30-day visible supply of municipal bonds yesterday totaled $2.75 billion, up $84.7 million from Friday. That comprises $1.54 billion of competitive bonds, up $138,9 million from Friday, and $1.21 billion of negotiated bonds, down $54.3 million.

Standard & Poor's Corp.'s Blue List of municipal bonds was up $61.6 million yesterday to $1.93 billion.

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