Tax-exempts mirrored the government market's roller-coaster ride yesterday, which started lower and steadily improved throughout the afternoon in reaction to a Federal Reserve move and over $2.5 billion generally well-received bonds. Yesterday morning, municipal investors were greeted by economic news that brought the bears out of hibernation and drove prices almost 3/8 lower. By the end of the session, prices rebounded to close about an 1/8 lower.
Leading economic indicators for April were up to 0.4%. Economists polled by The Bond Buyer had predictated a rise of 0.2%. The March figure was revised to show a 0.4% rise.
Later in the morning, new home sales for April were released. For the month, sales were up a weaker-than-expected 1.3%. Economists had called for a 6.4% rise, and the news boosted a sagging Treasury market, which had been as much as 3/8 point lower at the long end.
Although several participants said that the economic news hardly suggested an economy that was skyrocketing toward improvement, it was generally perceived as good news for the economic picture -- and bad news for the well over $2 billion in debt priced yesterday.
In the early afternoon, the Federal Reserve announced it was buying government securities with coupons longer than 1993. The move, while it rescued the market and aided in the pricing of yesterday's big new-issue slate, does not signal a change in policy.
The future market moved on the Fed's action. Prior to the announcement, the September municipal contract was quoted down 10/32. By settlement, the contract was up 9/32, to 94.16. The June contract settled up 2/32, to 95.15. The September MOB spread was measured at a negative 154.
The supply picture remained almost unchanged. Visible supply, as measured by The Bond Buyer, stood at $5 billion, while Standard & Poor's Blue List, which measures dealer holdings, was reported at $1.35 billion.
The largest deal of the day, $606 million Puerto Rico Highway and Transportation Authority revenue bonds, was priced and later repriced by a group led by Lehman Brothers.
The loan was split into four parts. The first consisted of $140 million Series S highway revenue bonds split into two maturities. The first comes due in 2018 and was priced as 6 5/8s to yield 6.79%. The second matures in 2022 and was priced as 6 1/2s to yield approximately 6.77%.
The second segment consisted of $285 million Series T highwasy revenue bonds split into three maturities. The first comes due in 2012 and was priced as 6 5/8s to yield 6.70%. The second term matures in 2018 and was priced as 6 5/8s to yield 6.79%. The third term matures in 2022 and was priced as 6 1/2 to yield about 6.77%.
The third segment of the loan consisted of $53.3 million Series U highway revenue refunding bonds. This segment was made up of serials priced to yield from 4.65% in 1994 to 5.95% in 1999.
The fourth segment consisted of $128 million Series V highway revenue refunding bonds. This portion contained serials priced to yield from 4.65% in 1994 to 6.50% in 2005.
There are two terms. The first comes due in 2012 and was priced as 6 5/8s to yield 6.70%, and the second matures in 2018 and was priced as 5 3/4s to yield 6.67%.
The loan carries a Baa 1 rating from Moody's Investors Service and an A from Standard & Poor's.
At the repricing $100 million bonds were added to the Series T portion, and the underwriter announced that the account was closed.
Also priced in the negotiated sector was an issue of $474 million Pennsylvania Intergovernmental Cooperation Authority special tax revenue bonds by a group led by Smith Barney, Harris Upham & Co.
The offering is the first from PICA, the group that serves as the city's oversight authority. The debt includes reoffered serial bonds priced to yield from 5.25% in 1996 to 6.20% in 2002.
There are three term bonds. The first matures in 2006 and was priced as 6.70s but was not formally reoffered to investors. The second term matures in 2012 and was priced as 6 7/8s to yield 6.90%. The third matures in 2022 and was priced as 6 7/8s to yield 6.95%.
The 1996 through 2002 serial bonds are insured by Financial Guaranty Insurance Co. and have a triple-A rating from all three agencies.
Uninsured bonds, maturing in 1995, 2006, 2012, and 2022 have been given a Baa rating from Moody's, A-minus from Standard & Poor's, and BBB-plus from Fitch.
The competitive sector was quiet, with few large deals priced. The largest offering was an issue of $65 million Denver GOs that was won by a group led by Merrill Lynch & Co. with a true interest cost of 5.953%.
The loan contained serial bonds priced to yield from 3.25% in 1993 to 6.30% in 2007. The issue is rated double-A by Moody's, Standard & Poor's, and Fitch.
Late in the session, Merrill Lynch reported an unsold balance of $21 million.
Negotiated Pricings
A group led by Lehman Brothers priced and repriced an issue of $233 million Michigan GOs split into two sections. At the repricing, yields were lowered around five basis points on some maturities.
The first consists of $133 million environmental program series 1992 bonds. This part of the loan consists of serials priced to yield from 6.20% in 2005 to 6.35% in 2007. A 2005 maturity was not reoffered. There was also a term bond maturing in 2012 that was priced as 6 1/4s to yield 6.40%.
The second segment consists of $100 million recreation program Series 1992 bonds.
This segment of the loan contained serials priced to yield from 3.20% in 1993 to 6.10% in 2004.
Both sections of the deal have been given an A1 rating from Moody's, and AA from Standard & Poor's and Fitch.
Late in the session, Lehman Brothers reported the account closed.
In other negotiated action, J.P. Morgan & Co. priced an issue of $198 million Board of Regents of the University of Texas System permanent university fund refunding bonds.
The loan contained serial bonds priced to yield from 5% in 1996 to 6.40% in 2008. There was also one temm bond that contained $90.3 million of the loan, maturing in 2013 and priced as 6 1/4s to yield 6.50%.
The loan was given a Aa1 rating from Moody's and AA-plus from Standard & Poor's and Fitch.
A group led by Smith Barney priced and repriced an issue of $74 million Los Angeles County certificates of participation.
The loan contains serials priced to yield from 3.20% in 1993 to 6% in 2007. The 2007 maturity was not formally reoffered to investors.
There were also two term issues. The first comes due in 2012 and was priced as 6s to yield 6.49%. The second matures in 2017 and was priced as 5 1/2s to yield 6.47%.
At the repricing, the yield of the 1993 maturity was lowered 10 basis points. For the two term bonds, yields were raised two basis points.
Secondary Market
Traders said that prices finished unchanged to 1/8 point lower.
One participant said that secondary prices started to improve about one hour before the announcement of the actions by the Fed and steadily improved throughout the afternoon.
In secondary dollar bond trading, Florida State Municipal Power Authority AMBAC 6s of 2012 were quoted at 94 3/8-3/4 to yield 6.50%; Greater Orlando Aviation Authority AMT insured 6 3/8s of 2021 were quoted at 96 3/4-7/8 to yield 6.62%; and New York State Power Authority 6 1/4s of 2023 were quoted at 96 3/4-97 1/4 to yield 6.49%. South Carolina PSA 6 5/8s of 2031 were quoted at 98 3/8-3/4 to yield 6.79%; California 6 1/4s of 2012 were quoted at 97-1/4 to yield 6.52%; and Oklahoma Turnpike Authority 6 1/4s of 2022 were quoted at 96 3/4-97 1/4 to yield 6.49%.
