The downward slide of municipal prices accelerated yesterday, falling 3/4 point, prompting underwriters to pull $1.4 billion North Carolina Easter Municipal Power Agency revenue bonds from the market.
Supply pressure has steadily pushed yields higher over the last several trading session's and The Bond Buyer's 30-day visible supply jumped to a record $10.86 billion yesterday. That was the third day in a row the visible total has broken records.
The overwhelming number of deals combined with a 10.4% jump in August housing starts to push prices 1/2 point lower at the open in sluggish trading yesterday.
Government prices deteriorated throughout the session and suddenly added 3/8 point losses at the long end late in the day.
Soon after the late Treasury price loss, municipal tone weakened further and market rumors abounded that the North Carolina deal would be pulled from the market.
Tax-exempts were quoted down 3/4 point on average at the close, but some dollar bonds were quoted down one point on the day.
In the debt futures market, the December municipal contract settled down 20/32 to 94.14. The December MOB spread narrowed to negative 285 from negative 305 Monday.
Power Deal Unplugged
A 10-member syndicate led by Smith Barney, Harris Upham & Co. as senior manager had priced the North Carolina Eastern Power Supply System bonds at midsession with a maximum yield of 6.57% in 2021.
But by 5 p.m., eastern daylight time, the firm announced the deal was postponed "due to market conditions."
Underwriting officials could not be reached for comment late yesterday.
However, market sources said the offering would likely not reappear in the market this week and could possibly be delayed for some time.
The tentative offering had included $115 million of Series A bonds priced to yield from 4.90% in 1997 to 6.30% in 2007. A 2010 term maturity was priced as 6 3/8s, to yield 6.45%. and a 2021 term maturity was priced as 6.40s, to yield 6.57%.
About $1.2 billion of Series B revenue refunding bonds were priced to yield from 5.65% in 2001 to 6.33% in 2016.
Term bonds in 2018 were priced as 6 1/4s, to yield 6.34%; a 2021 term, containing $240 million of the loan, was priced as 6.40s, to yield 6.57%; a 2022 term, containing $160 million of the loan, was priced as 5 1/2s, to yield 6.51%; and a 2026 term, containing $145 million of the loan, was priced as 5s, to yield 6.49%.
Finally, $180 million of non-callable Series B capital appreciation bonds were priced to yield from 5.90% in 2003 to 6.70% in 2010, and 6.80% in 2021, 2022, and 2023.
Almost the entire issue were rated A by Moody's Investors Service, A-minus by Standard & Poor's Corp., and A by Fitch Investors Service.
Series B revenue refunding bonds in 2007 and 2014 through 2016, which were insured by the Financial Guaranty Insurance Co., were triple-A rated by Moody's and Standard & Poor's.
AMBAC Indemnity Corp. insured the Series B 2018 term maturity, which also carried a triple-A ratings from all three ratings agencies.
Finally, the Series B CABS from 2003 through 2008 are also FGIC insured and carried triple-A ratings by Moody's and Standard & Poor's.
Other Negotiated Deals
Market players said that the postponement of the North Carolina deal did not bode well for near term price prospects, adding yesterday's other sizable deals saw mixed results from reluctant buyers.
Goldman, Sachs & Co. as senior manager priced and repriced $490 million of New York State Medical Care Facilities Finance Agency hospital and nursing home FHA-insured mortgage revenue bonds.
Term bond yields were lowered by five basis points in 2009, but yields in 2012, 2019, and 2029 were raised by about two basis points.
The final reoffering scale included serials priced to yield from, 3% in 1993 to 6.10% in 2005.
A 2009 super sinker was priced as 5.95s, at par; a 2012 term was priced as 6 1/4s, to yield 6.463%; a 2019 term was priced as 5 3/4s, to yield 6.47%; and a 2029 term, containing $137 million of the loan, was priced as 6 3/8s, to yield 6.536%.
The issue is rated AAA by Standard & Poor's.
A syndicate led by Bear, Stearns & Co. priced and repriced $234 million New Jersey Economic Development Authority economic recovery fund bonds.
At the repricing, yields were raised by 10 basis points for Series A CABs, while the Series B 1997 yield was lowered by about seven basis points. The yield on the 2007 Series B bonds was raised by five basis points.
The final reoffering included $182 million Series A bonds priced as 6s, to yield 6.443% for term bonds in 2021. And $90 million of the loan, also in a 2021 maturity, were not formally reoffered.
Capital appreciation bonds were priced to yield from 6.50% in 2007 to 6.80% in 2014.
There also was $52 million of taxable Series B bonds priced to yield 6.05% in 1997, 7.25% in 2002, and 7.95% in 2007.
The issue is rated A1 by Moody's, A-plus by Standard & Poor's, and AA by Fitch.
Goldman Sachs priced and repriced $71 million Modesto Irrigation District Financing Authority domestic water project revenue bonds.
At the repricing, yields were lowered by five to 10 basis points on serial bonds from 1994 to 2002.
The final reoffering included serial bonds priced to yield from 3.65% in 1994 to 5.85% in 2004. A 2009 term was priced to yield 6.20%, a 2019 term was priced to yield 6.30%, and a 2022 term was priced to yield 6.25%.
The issue is AMBAC insured and triple-A rated by Moody's and Standard & Poor's.
In the short-term note sector, Pennsylvania awarded $600 million tax anticipation notes due June 30, 1993 to four firms.
Goldman Sachs bought $375 million and reoffered the securities to investors at 3.10%; Lehman Brothers won $150 million, but reoffering specifics were not made available at press time; Prudential Securities took $50 million and reoffered the notes at 3.05%; and Bear Stearns took $25 million, but did not formally reoffer the securities.
Moody's rated the issue MIG1, Standard & Poor's rated the notes SP1-plus, and Fitch rated the issue F1-Plus.
Competitive New Issues
Sizable deals were scarce yesterday and action was dominated by the sale of $54 million Middlessex County, N.J., unlimited tax general improvement bonds.
A bidding group led by Goldman Sachs won the bonds with a net interest cost of 5.7719%.
Goldman reported an unsold balance of $13.7 million late yesterday.
Serial bonds were reoffered to investors at yields ranging from 3.80% in 1995 to 6.10% in 2012.
The issue is rated Aaa by Moody's and AA-plus by Standard & Poor's.
Secondary Market
The Blue List rose $95.5 million, to $1.39 billion yesterday and traders reported bid-wanted activity they estimated at between $150 million to $200 million, including a $70 million list out from an insurance company.
In addition, several blocks of New York City GO bonds were out for the bid ahead of next month's financing. One market source said that a $6 million block of 7s of 2016 "traded right around the coupon."
In secondary dollar bond trading, prices were quoted down 1/4 to as much as one point.
In late action, Chicago GO AMBAC 5 7/8s of 2022 were quoted at 93-1/2, to yield 6.40% on the bidside; Puerto Rico GO 6s of 2014 were quoted at 94 3/4-95, to yield 6.45%; and New York City Water Authority 6s of 2017 were quoted at 92 1/4-3/4, to yield 6.64%.
Denver Airport Authority 6 3/4s of 2022 were quoted at 95 1/2-96, to yield 7.11%; Los Angeles Department of Water and Power 6s of 2032 were quoted at 94 3/4-95 1/4, to yield 6.36%; and Florida Board of Education 6s of 2025 were quoted at 94 5/8-95, to yield 6.39%.
In the short-term note sector, yields were mixed on the day, traders said.
In late action, Los Angeles Trans were quoted at 3.10% bid, 3.05% offered: Texas Trans were quoted at 3.10% bid, 3.05% offered; and Wisconsin notes were quoted at 3.10% bid, 3.05% offered. New York State Trans were quoted at 3.25% bid, 3.15% offered.
Ratings Action
Standard & Poor's said yesterday it affirmed the various ratings on about $2.8 billion of California Agency and Public Works Board obligations and removed the debt from CreditWatch, where it was placed on Aug. 25, with negative implications.
Upon review of the state's actions to meet its lease payment obligations through the budget crisis, Standard & Poor's said it concluded that default risks are adequately reflected in the current ratings.
