A late Treasury market surge <

gave municipal players a confidence boost yesterday and prices firmed, helping the Street to work through $2 billion of new deals that were bogging down the market.

Underwriters priced nearly a <

week's worth of bonds on Wednesday, crowding the primary sector, netting mixed results. Buyers took advantage of the sudden supply glut and forced price concessions from underwriters and the Street yesterday, and market sources said there was some going away business done at down levels during the early part of the session.

But the bid improved later in the <

day in sympathy with 1/2 point Treasury gains and prices rose 1/8 to 1/4 point, while high-grade yields fell about two basis points on average.

In the debt futures market, the <

June municipal contract settled near the highs, up 7/32, to 95.14, while the June MOB spread widened to negative 155.

Market players said the price <

gains brightened hopes for good follow-through business on new deals, and the market tone turned from heavy and negative to optimistic.

"The Treasury market proved it <

could stabilize, and that made people more comfortable," a trader said. "It put confidence back into the market, whereas people were feeling like it could fall apart at any moment before."

Traders said there was still a <

good deal of overhang in the primary sector, which inevitably will spill into the the secondary market. Reflecting growing supply, Standard & Poor's Corp.'s Blue List of dealer inventory rose $55.4 million, to $1.46 billion.

New-issue activity was practically <

non-existent, but follow-through business picked up late in the afternoon, although bonds in the intermediate range seemed to hit resistance from investors.

In competitive action, J.P. Morgan <

Securities, senior manager for $257 million District of Columbia full faith and credit GO bonds, reported an unsold balance of $133 million late in the session.

First Boston Corp., reported an <

unsold balance of $59 million from $93 million Florida full faith and credit Jacksonville Transportation Authority senior lien bonds.

In other follow-through business, <

Morgan Stanley & Co., freed $228 million Sikeston, Mo., Electric System revenue refunding bonds from syndicate restrictions. In late trading, the 6-1/4s of 2022 were quoted at 97-1/4-1/2 to yield 6.45%.

Other secondary trading was <

moderate yesterday, but there were some bid-lists circulating and some larger blocks of bonds changing hands.

Market sources said that $13 million <

Cook County, Ill., MBIA-insured 6.60s of 2022 traded and were reoffered at 99-5/8s to yield 6.62%. There also was about $13 million New York State Medical Care FHA-insured 6.95s of 2032, which were out for the bid. About $10 million Florida Board of Education 6s of 2025 were said to have traded right around 6.50%.

In secondary dollar bond trading, <

some prices improved about 1/8 to 1/4 point.

In late trading, New York State <

Power Authority 6-1/4s of 2023 were quoted at 96-7/8-97-1/8 to yield 6.48%, South Carolina PSA 6-5/8s of 2031 were quoted at 98-5/8-7/8 to yield 6.72%, and California GO 6-1/2s of 2012 were quoted at 97-1/8-1/4 to yield 6.76%. Greater Orlando Aviation Authority AMT insured 6-3/8s of 2021 were quoted at 96-7/8-97-1/4 to yield 6.61% and Oklahoma Turnpike AMBAC insured 6-1/4s of 2022 were quoted at 97-1/4-3/8 to yield 6.45%.

<

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