Tax-exempts languished despite Treasuries' rebound yesterday, but the municipal futures contract ended nearly a point higher.

"There aren't a lot of buyers for cash," a municipal trader said.

Accounts of yesterday's session differed. A municipal analyst said dollar bonds fell 3/8 points, while yields on high-grade issues rose by two basis points. Activity was light, he said.

However, some traders pegged highgrade issues at mostly unchanged yesterday, and they said dollar bonds ended anywhere from unchanged to up 1/8 to point.

In Treasury market, the 30-year bond climbed slightly more than 5/8 point to yield 7.45%, helped by a stable dollar and lower commodities prices. The improvement was reflected in municipal futures, where the September contract closed nearly a point higher at 90 14/32s. Yesterday's September MOB spread was negative 410, compared to negative 415 on Friday.

A municipal trader cited four to five bid lists out during the morning hours, with blocks ranging from $3 million to $15 million.

As for activity, the only business getting done yesterday was on the downside, he said.

"I looks like some people have decided to bite the bullet and hit some of the bids," the trader said.

"The bid side of the market is very, very weak," a third trader said just before noon yesterday. At that point, he estimated that the bid side had fallen off by 10 to 15 basis points.

While retail may realize some bargains exist, institutions are sitting on the sidelines, possibly waiting for the market to go lower, the trader said.

Christopher M. Dillon, a vice president at J.P. Morgan Securities, said several factors are conspiring against tax-exempts at present.

Continued weakness in the U.S. dollar may bring about another tightening of monetary policy by the Federal Reserve, he said. That could lead investors to postpone buying in the hope of better opportunities later, Dillon said.

In addition, the funds experienced outflows last week. And, given the current rate environment, they are likely to maintain larger cash positions for fear of possible shareholder redemptions, he said.

Municipals have also gotten expensive versus taxables, which has lessened the market's appeal for cross-over buyers such as insurance companies, Dillon said.

One municipal trader pointed to the lack of desire for municipal cash despite the estimated $22.5 billion of bonds that will be called or mature during the month of July.

"Nobody wants to buy a bond, or so it seems," the trader said. While fewer bonds in the market should heighten demand, that scene is not being played out, he said.

"I guess that's the theory. But if you think the proof is in the pudding, it ain't," the trader said. Notes Sold for NYC Budget

Unknown to many market participants, Chemical Securities sold $208 million in tax-collection backed notes last Wednesday to help New York City pay its bills in fiscal 1994, which ends Thursday.

According to the deal's preliminary official statement, the notes are technically due on June 15, 1997, but the city plans to repay the securities sometime in 1995. As a result, Chemical priced the notes 70 basis points above the 4 1/4% Treasury security maturing in January 1995.

"The issue wasn't over-subscribed, but we got good market reaction," said one underwriter.

Although public finance investment bankers at Chemical pitched the issue to the city, the transaction was sold by the firm's asset-backed desk.

The offering was public but it was barely noticed by many market participants. Sources with knowledge of the issue say Chemical planned it that way, fearing a lawsuit from taxpayer activist Robert L. Schulz.

Last year, Schulz threatened to sue the city if it did the issue, which involves a securitization of the city's delinquent property tax receivables to help plug a budget gap in fiscal 1994.

Schulz, who sued several counties in New York State that sold similar issues, said the transactions violate parts of the state constitution's definition of "useful life." Schulz said the issues are unconstitutional because municipalities are using them to produce cash for operating purposes, which have no definable useful life. Schulz could not be reached for comment.

Charles Gasparino contributed to this column.

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