The Bond Buyer recently published preliminary data on the municipal bond market for 1987. This data only confirmed what everyone already knew, and that was that the Tax Reform Act of 1986 continued to make inroads into the volume of municipal financing.

The year's new issue volume of long-term debt (maturities more than 12 months), at $93.9 billion, was the lowest volume of financing since the $83.3 billion financed in 1983. Of the long-term financing, 62.7 percent was revenue bonds, while 37.3 percent was general obligation issues.

The Bond Buyers' data also showed that the issuance of $15.2 billion of notes (maturities of 12 months or less) had declined for the sixth year in a row. Consequently, the total municipal financing for 1987, at $109 billion, was 33 percent lower than 1986.

It is interesting to note that tax-free rates were lower during the first quarter of 1987, then rose to their highs during the second and third quarters, only to decline after Black Monday, Oct. 19.

Despite the volatile movements in interest rates, 39.6 percent of the new issues refunded older outstanding issues, at lower rates of interest.

Apropos of the volatile rates, the Bond Buyers G.O. Index recorded its low of 6.54 percent on Jan. 22 and its high of 9.17 percent on Oct. 15. Coinciding with the same dates, the 25 Bond Revenue Index recorded a low of 6.93 percent and a high of 9.59 percent.

The six states issuing the most debt were: California, $10.5 billion; New York, $10.1 billion; Texas, $7.4 billion; Florida, $4.8 billion; Pennsylvania, $4.6 billion, and Louisiana, $3.8 billion.

Of the credit ratings revised in 1987, Moody's rating service lowered more ratings (322) than it raised (268).

The 268 issuers upgraded by Moody's were from 39 states. California led with 39 upgrades, followed by New York with 32 upgrades.

Four major cities were also upgraded. They were the general obligation issues of Chicago, Indianapolis, Boston and Cincinnati.

Of the ratings lowered, 153, or 47.5 percent of the total downgrades, were in three states: Texas (99), Louisiana (20) and Wyoming (34). Localities in these states whose economies and revenue bases were closely tied to the depressed oil and gas industry were still being adversely affected.

It should be mentioned that although the Tax Reform Act of 1986 has succeeded in curtailing the issuance of "enterprise" types of municipal securities, there is still an immense total of unissued debt waiting to be underwritten. I am referring to the $2 trillion to $3 trillion "infrastructure" debt that needs to be sold over the next 10 to 15 years. Infrastructure refers to the water systems, bridges, roads, public facilities, etc., of our states and municipalities, which are deteriorating and need to be replaced or rebuilt.

The main problem is, who is going to pay for this massive reconstruction -- the states, the cities or the federal government? Until that is decided, the infrastructure will not be rebuilt.

Congress and the administration hold the keys. The Reagan administration believes in decentralization of government and prefers to give the money-raising function back on the states and cities.

With the federal government continuing to run a large budget deficit, both Congress and the administration may be reluctant to underwrite such a huge undertaking.

But as the roads, bridges and public facilities continue to fall apart, something must be done, and soon. Did you know that New York City receives much of its water through an antiquated wooden aqueduct?

The Treasury will offer a two year note, in minimums of $5,000, on Wednesday. They should return 7.50 percent. James E. Lebherz has 28 years' experience in fixed-income investments.