The successful completion of the huge Treasury auction yesterday eased the market's technical fears, but municiplas again lagged governments with prices up only 1/8 to 3/8 in light professional trading.

Tax-exempt prices were unchanged and the tone was heavy during the morning session as supply weighed on market psychology. But the last leg of the Treasury's $38 billion annual refunding went without a hitch, boosting the 30-year bond 1 point.

Municipals climbed modestly but traders across the country reported good demand for bonds, easing supply worries.

"Supply had taken control and there was a fear that the secondary would get bogged down," said a New York based trader. "But things are moving in an orderly fashion and as long as governments stay firm we'll get these deals done."

Standard & Poor's Corp.'s The Blue List of dealer inventory rose to $1.4 billion yesterday from $1.3 billion Wednesday, but traders reported little retail selling and light bid-wanted activity.

In follow-through business, several deals were freed from syndicate restrictions and seemed to be faring well in late secondary trading.

Bank of America, senior manager for $404 million of California various- purpose bonds, reported the account closed and the bonds free to trade.

In secondary trading, the 5 3/4s of 2010 were quoted at 6.35% yield, five basis points below the original 6.40% reoffering yield. The 6s of 2008 were quoted at a 6.30% yield, right around the original offering.

In other action, Goldman, Sachs & Co. as senior manager reported that a remaining $6.6 million balance from $157 million of Missouri general obligation building and water pollution control refunding bonds traded and the account closed. Bonds were reoffered on broker wires at 5.65% late in the session, where they were originally reoffered at 5.60%.

Bonds were also moving out of unsold balances at a quicker pace, market participants said.

Lehman Brothers, senior manager for $321 million of Pennsylvania general obligation bonds, reported an unsold balance at $26 million late in the session, compared to $117 million Wednesday.

First Boston reported $6.3 million of bonds sold yesterday, leaving an unsold balance of $20 million from $272 million of Georgia GOs.

Primary activity was light yesterday as underwriters took a breather before another slew of new deals hits the market next week.

But in competitive new-issue action yesterday Kidder, Peabody & Co. as senior manager won $225 million of Rhode Island Convention Center Authority revenue bonds with a true interest cost of 6.725%.

A Kidder official reported an unsold balance of $125 million late in the session. The officer said that the deal saw demand from institutions and the discount bonds on the long end were well sought after. The new credit was "not an easy one to digest at first" but that bond insurance and the market's upturn helped the sale.

The offering included serial bonds priced to yield from 5.25% in 1995 to 6.40% in 2005.

A 2007 term is priced as 6.60s at par, a 2012 term is priced as 6.65s at par, a 2020 term, containing $89 million of the loan, is priced as 6.70s to yield 6.75%, and a 2023 term is priced as 6 3/8s to yield 6.75%.

The issue is insured by MBIA and rated triple-A by both Moody's Investors Service and Standard & Poor's Corp.

Returning to secondary trading, activity was subdued compared to Treasury trading, but the tone was firm.

Denver Airport bond prices snapped back after several days of declines. The 7 3/4s of 2021 were quoted late in the session at 93-1/2 to yield approximately 8.34%, a price increase of nearly 1 point.

New Jersey Turnpike 7.20s of 2018 continued to outperform thanks to a recent decision by the Turnpike Authority that specified the bond as noncallable. The 7.20s were quoted late in the session at 105 1/2-106 to yield 6.75% on the bid side.

In other dollar bond trading, prices were generally quoted up 1/8 to 3/8 in spots.

North Carolina Eastern 6 1/2s of 2017 were quoted at 96 1/8-1/2 to yield 6.78%. Washington Public Power Supply System 6 7/8s of 2017 were quoted at 99-1/4 to yield 6.95%, and Massachusetts Water Resources Authority 6 1/2s of 2019 were quoted at 94 1/2-3/4 to yield 6.92%.

Prices were volatile in the short-term sector in early trading, but came back to unchanged by session's end. Traders reported moderate selling, with one institution unloading around $90 million of notes.

In late secondary trading, Los Angeles Trans were quoted at 4.10% bid, 4.05% offered. March New York State Trans were quoted at 4.91% bid, 4.85% offered and New York City Rans were quoted at 4.85% bid, 4.80% offered. Texas notes continue to show the lowest yield in the note market and were quoted at 4.05% bid, 4.00% offered in late cast trading.

Morgan Stanley & Co. tentatively priced Salem County, N.J., Pollution Control Financing Authority waste disposal revenue bonds for the E.I. duPont de Nemours and Company Chamber works project.

The offering, subject to the federal alternative minimum tax, included a 2021 term tentatively priced as 6 1/2s to yield 6.774%.

The bonds are rated Aa2 by Moody's and AA by Standard & Poor's.

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