Municipal prices were unchanged to 1/8 point higher in dull holiday trading yesterday as the market continued its slow recovery from last week's price drops.

Prices improved slightly for the third session in a row yesterday after the crushing blows suffered early last week.

Tax-exempts took their lead from the Treasury market yesterday but worries over a weaker dollar and concern about the release of August employment data Friday prevented both markets from accomplishing much.

Treasury traders were hesitant enough so that not even weak economic data were able to inspire more than a slight move higher. Municipal rose about 1/8.

Sales of new single-family homes in July fell 2.6%, to a seasonally adjusted annual rate of 563,000, the Commerce Department reported. Most analysts expected a modest gain of 1% to 3% in July.

The decline followed a revised 5.3% gain in June sales, originally reported as a 7.9% gain.

In addition, the Chicagoland business barometer decreased to 58.4% in August on a seasonally adjusted basis from 59.2% in July, the Purchasing Management Association of Chicago said.

An index reading below 50% signals a slowing economy, while a level above 50% of suggests expansion.

In the debt futures market, the September municipal contract settled down 3/32, to 97.07.

A break from new issuance gave the Street some breathing room to work on inventory. The Bond Buyer's 30-day visible supply rose to $4.98 billion, but The Blue List fell $90.6 million, to $1.5 billion.

Through Aug. 28, $150.7 billion of new issues have been priced this year, compared to $104.7 billion for the same period in 1991, a 43.91% increase.

New issuance was light yesterday, dominated by Goldman, Sachs & Co.'s pricing of $130 million Tacoma, Wash., Electric System refunding revenue bonds in the negotiated sector.

At the repricing, yields on the 2009 and 2010 maturities were lowered by five basis points.

The final reoffering scale included serial bonds priced to yield from 4.60% in 1996 to 6.25% in 2009. A 2012 term, containing $33 million of the loan, was priced as 5 1/2s to yield 6.25%.

The isssue is insured by the AMBAC Indemnity Corp. and is triple-A rated by Moody's Investors Service and Standard & Poor's Corp.

In follow-through business, Smith Barney, Harris Upham & Co. as senior manager freed $296 million of Clark Country, Nev., McCarran International Airport passenger facility charge revenue bonds from syndicate restrictions.

In late secondary trading, the AMBAC-insured 6s of 2022 were quoted at 6.35% bid, 6.34% offered. The bonds were originally priced to yield 6.35%.

Secondary Trading

Activity was dominated by some small bid-wanted lists and some small block of bonds.

In secondary dollar bond trading, prices were unchanged to up as much as 1/4 point on the day.

In late trading, Chicago GO 5 7/8s of 2022 were quoted at 93 1/4-3/4 to yield 6.3%, Puerto Rico GO 6s of 2014 were quoted at 95 3/8-3/4 to yield 6.39%, and Florida Board of Education 6s of 2022 96 1/4-1/2 to yield 6.27%. Los Angeles Department of Water and Power 6s of 2032 were quoted at 95 3/8-95 3/4 to yield 6.31% and New York City Water Authority 6s of 2017 were quoted at 94-94 1/2 to yield 6.48%.

In the short-term note market, yields were five to seven basis points lower on the day.

In late trading, Los Angeles Trans were quoted at 3.98% bid, 3.05% offered, Texas Trans were quoted at 3.05% bid, 3.03% offered, and Wisconsin notes were quoted at 3.08% bid, 3.05% offered. New York City Tans were quoted at 3.03% bid, 3% offered, and New York State Trans were quoted at 3.15% bid, 3.10% offered.

Postponed Deals

PaineWebber Inc., senior manager for $250 million Illinois refunding bonds scheduled to be negotiated this week, said the deal has been postponed.

The issue joins 27 other bond deals set for negotiated pricing that have been placed on a "day-to-day" basis because of unstable market conditions.

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