A sizable jump in the Purchasing Managers' Index surprised the Street yesterday, and prices fell 1/4 to 3/8 point on average.

Market players ended last week's roller-coaster sessions on an upbeat note Friday, but optimism wavered early yesterday.

The credit markets opened lower as the Street took profits ahead of the first of a slew of economic indicators to be released this week, dominated by Friday's employment report.

Initially, prices remained in a tight range after it was reported that personal income edged up 0.1% in April, while spending advanced 0.3%, and construction spending slipped 0.3% to a seasonally adjusted annual rate of $418.8 billion.

But confidence eroded immediately after the National Association of Purchasing Management reported that the manufacturing sector of the economy surged surprisingly in May. The Purchasing Managers' Index jumped to 56.3% in May from 51.3% in April.

A reading above 50% indicates manufacturing is generally expanding, while a reading below 50% indicates it is not expanding.

Treasury prices fell as much as one point after the news, with municipals following in the distance.

Trading was illiquid as market players opted not to test the fragile market and moved to the sidelines ahead of today's new-issue slate.

Treasury prices crept back during the afternoon, but by session's end tax-exempt prices were quoted down 1/4 to 3/8 point on average and down as much as 1/2 for some names.

In the debt futures market, the September municipal contract settled down 17/32 to 94.07.

New-issue activity in the longterm sector was practically non-existent, but in the short-term note market, $130 million San Bernardino County, Calif., tax and revenue anticipation notes were won by a Smith Barney, Harris Upham & Co. group.

The syndicate won the securities with a net interest cost of 3.75% and reoffered them to investors as 3-3/4s to yield 3.25%, due July 30, 1993.

The issue is rated SPI-plus by Standard & Poor's Corp.

Meanwhile, the largest deal marketed in the long-term sector was $30 million Ormond Beach, Fla., Water and Sewer System refunding revenue bonds, won by a William R. Hough & Co. group, with a true interest cost of 6.3544%. The bonds were reoffered to investors at yields ranging from 3.30% in 1993 to 6.40% in 2010 and 6.45% for term bonds of 2012.

The issue was insured by Financial Guaranty Insurance Co. and rated triple-A by Moody's, Standard & poor's, and Fitch Investors Service.

Today's new issues will test the current market levels, traders noted, and there was some nervousness about supply late yesterday.

The Pennsylvania Intergovernmental Cooperation Authority today will price its first bond deal for Philadelphia. PICA serves as the city's oversight authority, and will sell about $474 million of revenue bonds backed by 1.5% of the city's sales tax.

The bonds are rated Baa by Moody's, A-minus by Standard & Poor's, and BBB-plus Fitch.

Traders expect uninsured bonds, due in 20 years, to fetch yields as low as 6.95%. But other traders said they would expect to see yields as high as 7.25%, especially in a weaker market.

Secondary Trading

Traders reported some bid-wanted lists circulating in the secondary, but said there were few sizable blocks of bonds out for the bid.

In secondary dollar bond trading, Florida State Municipal Power Authority AMBAC 6s of 2012 were quoted at 94-1/2-3/4 to yield 6.49%, Greater Orlando Aviation Authority AMT insured 6-3/8s of 2021 were quoted at 96-3/4-97 to yield 6.62%, and New York State Power Authority 6-1/4s of 2023 were quoted at 97-1/2 to yield 6.47%. South Carolina PSA 6-5/8s of 2031 were quoted at 98-1/2-7/8 to yield 6.73%, California 6-1/4s of 2012 were quoted at 97-1/2 to yield 6.52%, and Oklahoma Turnpike Authority MBIA 6-1/4s of 2022 were quoted at 97-1/8-3/8 to yield 6.46%.

In secondary short-term action, traders reported a quiet day with little change in note prices.

Late in the session, California Rans 3-1/4s were quoted at 3.65% bid, 3.60% offered; Los Angeles Trans 5s were quoted at 3.65% bid, 3.60% offered; Pennsylvania Tans 5-1/4s were quoted at 3.60% bid, 3.55% offered; and New York State Trans 3.65s were quoted at 3.25% bid, 3.20% offered.

New York GOs

New York State Comptroller Edward V. Regan announced yesterday the state will sell $250 million of general obligation bonds on June 10. The bonds will be dated June 15, 1992. The issue will consist of serial maturities ranging from one to 30 years.

Proceeds will be used for various capital construction purposes and to redeem $70 million in outstanding bond anticipation notes.

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