A sick dollar that weakened Treasuries, too few buyers, and too much dealer inventory helped knock municipals down 1/2 point overall yesterday.

Dollar bonds fell 3/8 to 1/2 point, while yields on high-grade issues rose five basis points overall. Secondary activity was light "except for a flood of bid lists," a municipal analyst said. The lists totaled more than $300 million, he said.

"You just had everything working against you today," the analyst said. As for yesterday new issues, "pricing was a decided ~give' to last week's levels," and reception was slow, the analyst said.

In addition, remnants of previous new issues remain.

"You've still got a lot of overhang from new issues that are undistributed," the analyst said.

A municipal trader cited "a lack of institutional buyers for sure."

"As far as retail goes it's spotty, and it's really for select names and maturities," he said.

For instance, retail still seems to favor names such as New Jersey in the 15-year to 20-year range, he said.

"We got rich to Treasuries over the past couple of months," he said, "We got to the point where our traditional cash flow buyers started to turn to other markets such as corporates," the analyst said.

The municipal trader said he believes that municipals are close to a low. Once the dollar steadies, Treasuries should also begin to stabilize. That government market stabilization, coupled with scant municipal forward supply, should then help municipals outperform, he said.

In debt futures yesterday, the September municipal contract settled down more than 3/8 point at 90 11/ 32s. Yesterday's September MOB spread was negative 386, compared to negative 388 on Monday.

In the government market, the 30-year bond fell more than 1/4 point to yield 7.49% after the dollar at one point hit a post-World-War-II low of 100 yen.

"The bottom line is that the world lacks confidence in U.S. policy," Brian S. Wesbury, chief economist at Griffin, Kubik, Stephens & Thompson Inc. "What makes up that policy is a return to 1970s type economic policy."

Wesbury called U.S. policy a "restrictive supply side policy" combining higher taxes, regulations and mandates; and a looser monetary policy, which entails holding short-term interest rates artificially low.

"I think another [Federal Reserve] tightening is imminent," Wesbury said, adding, however, that a July tightening is not a given. He cited pressure from Congress and the Clinton administration as well as some statements by certain Fed officials that inflation is under control as factors that argue for a tightening coming later rather than sooner.

In competitive action yesterday, a Merrill Lynch group won $122 million Hillsborough Co., Fla., solid waste and resource recovery refunding revenue bonds, bidding a true interest cost of 5.511%.

The MBIA-insured offering consisted of serial bonds priced to yield from 4.20% in 1996 to 5.80% in 2008. A 1995 maturity was not formally re-offered to investors. A balance of less than $73 million was reported late in the day.

Also yesterday, Smith Barney Inc. yesterday reported an unsold balance of $47 million from the $104 million in Clark Co., Nev., general obligation bonds it won with a true interest cost of 6.027%.

In negotiated action yesterday, a Merrill Lynch group priced and then repriced $169 million New York State Medical Care Facilities Finance Agency hospital and nursing home FHA-insured mortgage revenue bonds series 1994 B.

The offering consisted of serial bonds priced to yield from 3.50% in 1995 to 5.95% in 2010. A 2014 term, containing $41 million, was priced at 97.50 to yield 6.219%. A 2024 term, containing $40.2 million, was priced at 97.50 to yield 6.302%. At the repricing, yields on serial bonds were lowered from five to 15 basis points, while the yield on the 2024 term was dropped by about a basis point.

In other news, the 30-day visible supply for today totals $3.6 billion, down $301 million from yesterday. That comprises $1.1, billion of competitive bonds, down $431 million from yesterday, and $2.5 billion of negotiated bonds, up $130 million from yesterday.

Standard & Poors Corp.'s Blue List of municipal bonds was up $74.9 million yesterday, to $2.12 billion.

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