WASHINGTON, Aug 1 (Reuters) - Issuance of U.S. municipal bonds fell steeply in July, with sales for the first seven months of 2014 running 15.4 percent below the same period last year, according to Thomson Reuters data released on Friday.

Total sales in July were $25.6 billion, 23.8 percent below June and 10 percent below the $28.4 billion sold in July 2013.

June's issuance is proving an anomaly instead of an indicator that the summer reinvestment season, when bondholders typically spend their coupon and principal payments on more municipal debt, could lift the market. Sales leapt to $33.61 billion in June - the highest monthly total since April 2013.

But in July sales of both new and refunding bonds tumbled from that peak. Refinancing fell to $13.04 billion from $19.38 billion in June and new debt to $12.56 billion from $14.23 billion in June.

Altogether, there were 786 bond deals in the month, the lowest since March. Most of the deals - 428 - were for new debt, indicating that new borrowing was carried out in smaller sales.

For most of 2014, desiccated issuance has given buyers few places to put their money.

Rising municipal bond interest rates in 2013 made refunding no longer affordable and ended a long string of refinancing issuance. While refunding in July was 29 percent below sales in July 2013, new debt ran 21.4 percent more than in July 2013.

Some see a brighter tomorrow for municipal bonds.

"Munis have come a long way, and the market has righted itself to more traditional levels. But we still think they offer value and if you are in a high tax bracket the tax exemption is still a great benefit," said Jim Murphy, manager of the T. Rowe Price Tax Free High Yield and the new Intermediate Tax Free High Yield Funds, in a statement. (Reporting by Lisa Lambert; Editing by Tom Brown)