UPDATE 1-Bear Stearns arb offers $240 mln of munis-money mgr

(Adds details, paragraphs 4-11)

By Joan Gralla

NEW YORK, April 29 (Reuters) - Bear Stearns' BSC.N arbitrage program was offering about $240 million of municipal bonds for sale, a money manager said on Tuesday, capping gains in the broader market.

The list's impact was deepened by fears that it signaled more such selling. Earlier this year, billions of dollars of municipal bonds slammed the market when hedge funds and arbitrage programs scrambled to cover soaring financing costs.

A spokeswoman for Bear Stearns, which is being bought by JPMorgan Chase (JPM.N: Quote, Profile, Research), had no comment.

A JPMorgan Chase spokesman was not immediately available to comment on speculation that Bear Stearns was selling positions its new owner did not want.

"This is the first list I've noted in awhile," the money manager said.

Several smaller bid-wanted lists were also being offered, market sources said. Those sellers might be trying to get ahead of any additional waves of selling, said the sources, who all requested anonymity.

One of the few positive side effects of Wall Street's profit-slaying subprime mortgage plays is that these players now have an abundance of income-shielding tax losses.