As one dealer summed up the week for tax exempts, "The hopes and expectations of the dealers ran smack into an exhausting high-grade calendar." Of the five high-grade issues that came last week, only the New Mexicos sold well.

The other four, which totaled $316 million, showed unsold balances of $195 million (61 percent) following the initial order periods. The Wisconsin issue which sold first cut prices by points ($40 per bond) to induce customers to purchase the remaining bonds.

This week's calendar consists of approximately $525 million new high grades, including the $300 million State of Oregon blockbuster.

This sector of the municipal market had been overpriced because these bonds were purchased eagerly during the rally and because they were also in short supply. Dealers had hoped that the commercial banks which curtailed loan demand would purchase these new issues. But this was not to be the case.

Consequently a buying opportunity presents itself from two directions. The new issues this week -- especially the Oregons -- will be cheaper than last week's fare. And barring disasterous economic news or easing of credit by the Fed, last Week's issues will have to have their prices cut to move the merchandise.

The other main isues this week are the State New Jersey, Montgomery County, Dallas County, Texas, and Lynchburg. Check your broker if you have an interest in any of these so that you may purchase quality bonds at distressed prices.

Another point of interest: The Yield curve in the municipal area is becoming more pronounced. For example, in April when the State of Georgia's issue sold, the return on the longest maturity was 85 basis points more than the shortest maturity. Last week when the Winsconsins sold, the return on the longest maturity was 170 basis points more than the shortest maturity.

In effect, the yields on the shorter maturitues -- one to five years -- have declined while the yields on the longer maturities have risen between the sale of the Georgia and Wisconsin issues.

The corporate market waded through another week of ample supply featuring the $600 million AT&T 10-year note which returned 10.375 percent. All told, about $1.7 billion worth of new corporates were offered at slightly cheaper levels to facilitate sales.

A heavy calendar is anticipated this week, too. The $500 million Chrysler Corp. government-guaranteed notes are scheduled and are all circled out before they are even priced.

Currently the bond markets are caught in a tug of war between two forces: overwhelming supply, that is forcing rates higher, and a deteriorating economy, which hold out the hope of reduced inflation and lower interest rates. At this point supply is winning the day. This situation could change quickly as bad economic data and lower inflation numbers appear. The overall trend for rates is lower at least for the next few months.