Municipals were unchanged to slightly firmer in light trading yesterday ahead of today's employment data.

Trading was listless in the credit markets as both investors and traders waited for today's May employment report. Municipal prices were mostly unchanged, but some bonds posted gains of 1/8 point by session's end.

In the debt futures market, the September municipal futures contract settled up 1/32, to 94.18, and the MOB spread was calculated at negative 153, unchanged on the day.

Yesterday, initial state unemployment insurance claims increased 4,000, to a seasonally adjusted 407,000 in the week ended May 23. The increase was expected, and the markets ignored the report.

Although the jobs data has dominated market psychology this week, many market players speculated that yesterday's firm tone was due, in part, to expectation of increased investor demand when a plethora of bonds are called July 1. The support for municipals comes as the buyers scramble to hoard bonds ahead of the call.

The story of the monster call is a relatively simple one. In January 1982, The Bond Buyer's revenue bond index reached its highest level ever, peaking at 14.32%. This July 1, a decade later, over $10 billion of the bonds sold at such high rates are due to be called.

In a recent article appearing in Smith Barney, Harris Upham & Co.'s Credit Market Comment, George Friedlander, managing director of portfolio strategy, explained that a portion of the money that will be available after the redemptions is likely to increase demand for bonds and could send prices higher, but not dramatically.

"The amount of money coming into the marketplace will be staggering," he said. "It will somewhat affect prices, but I don't expect any huge shifts."

Other market players were more skeptical, noting that the calls will have very little effect on prices. "Everybody's talking about it, but I'm dubious that it will have much effect at all," said one Wall Street-based trader. "One would assume that we should have a monstrous rally if it were the real thing. It's akin to the January reinvestment rally that we always talk about, but rarely happens."

But Mr. Friedlander suggested that a large portion of the money coming due will be reinvested in securities. He noted, however, that many of the largest, sophisticated investors have probably already prices this glut of money into their future investment plans.

"The vast majority of investors who are losing bonds in July are aware of it," Mr. Friedlander says in his report. "Indeed, that paper is viewed as being a short-term component of their portfolio."

Meanwhile, investors who indirectly own bonds, such as holders of unit trusts, may be less aware of the repercussions of the July 1 call of their bonds and will have a difficult time finding comparable yields for their investments, Mr. Friedlander added.

Yesterday's Market

Market activity was dull yesterday, both in the primary and secondary sectors.

Leading new-issue activity, Goldman, Sachs & Co. priced and repriced $82 million Indiana Housing Finance Authority single-family mortgage refunding revenue bonds in the negotiated sector.

Yields were lowered by 10 basis points on the 1994 through 2000 maturities, by 7.5 basis points on the 2017 maturity, and by five basis points on the 2001, 2002, and 2010 maturities.

The reoffering scale included serial bonds priced at par to yield from 4.55% in 1994 to 6.35% in 2002. A 2005 term was priced as 6.60s at par, a 2010 term was priced at par to yield 6.75% and a 2017 term, containing $39 million of the loan, was priced at par to yield 6.80%.

The bonds are rated Aa by Moody's.

In follow-through business, J.P. Morgan Securities, senior manager for $196 million Board of Regents of the University of Texas System permanent university fund refunding bonds, released the bonds from syndicate restrictions. In late secondary trading, the 6 1/4s of 2013 were quoted at 96 3/4-7/8 to yield 6.53%, where they were originally priced to yield 6.50%.

Lehman Brothers freed $233 million Michigan GO bonds from syndicate restrictions. In late trading, the 6 1/4s of 2012 were quoted trading at 98 1/8-lock to yield 6.41%. They were originally offered to investors at 6.40%.

Lehman also was senior manager on $125 million Baltimore County, Md., unlimited tax bonds and reported an unsold balance of $53 million late in the session.

Secondary trading was light, and traders reported only small scattered bid-wanted lists and very little block trading.

In secondary dollar bond trading, prices were mostly unchanged to 1/8 point higher in spots.

Florida Municipal Power 6s of 2012 were quoted at 94 1/2-95 to yield 6.49%; Greater Orlando Aviation Authority AMT insured 6 3/8s of 2021 were quoted at 97-3/8 to yield 6.60%, and New York State Power Authority 6 1/4s of 2023 were quoted at 97-3/8 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 97-3/8 to yield 6.52%, and Oklahoma Turnpike Authority MBIA 6 1/4s of 2022 were quoted at 97 3/8-1/2 to yield approximately 6.44% on the bid side.

Short-term market participants reported a busy day yesterday, with heavy interest in notes maturing in June.

"There is a lot of money interested in short-term issues," said a trader. "A lot of the money being invested comes from several large pre-refundings that were done within the last couple of weeks."

Late in the session, California Rans 3 1/4s were quoted at 3.15% bid, 3.10% offered; Los Angeles Trans 5 1/4s were quoted at 3.15% bid, 3.10% offered; Pennsylvania Tans 5s were quoted at 3.15% bid, 3.10% offered; and New York State Trans 3.65s were at their low reporting at 2.97% bid, 2.95% offered.

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