Nearly $7 billion of new deals, dominated by a $5 billion California note offering, slammed into the market yesterday, knocking long bond prices down.
The intermediate and short end of the curve, however, withstood the onslaught and remained firm.
Long bond prices were unchanged to down 1/2 point as tremendous pressure from record supply allowed buyers to shun long bonds until yields rise further.
Currently, the ratio of triple-A municipals to Treasuries is 85% on the long end, compared to 77.8% on July 30, when prices were at their highs.
Conversely, short-term and intermediate prices rose, thanks to attractive yields compared with taxable Treasury bonds and plenty of investor cash.
Mirroring the broader market picture, $5 billion California notes saw strong demand at aggressive levels, while the longer maturities of bond deals saw mixed results.
Reflecting the strong demand for short paper, The Bond Buyer one-year note index hit a record low of 2.87% yesterday, down 25 basis points on the week.
Reflecting weaker demand for long bonds, the 40-bond yield to maturity was down only three basis points, to 6.39% for the same period.
California Notes
A 29-member syndicate led by Lehman Brothers priced and repriced the California revenue anticipation notes, which are non-callable.
Reoffering yields were lowered by 10 basis points for notes due Jan. 13, 1993, and April 26, 1993. The reoffering yield on notes due May 12, 1993, were lowered by 15 basis points.
"Demand was strong because the short-side has been attractive and this was the last large note transaction of the year," Frank Murphy, manager of short-term product at Lehman said. "Anyone on the sidelines knew this was the last time to get in."
Mr. Murphy said the deal was oversubscribed and, after the repricing, orders remained firm.
The final reoffering included $500 million Series A fixed-rate notes, due January 13, 1993, priced as 3 1/4s, to yield 2.65%; $750 million Series B fixed rate notes, due April 26, 1993, priced as 3 1/2s, to yield 2.85%; $2.5 billion Series C fixed rate notes, May 12, 1993, priced as 3 1/2s, to yield 3%; and $1.25 billion Series V variable rate demand notes, due April 26, 1993.
The Series A notes are rated MIG-1 by Moody's Investors Service, SP-1 by Standard & Poor's Corp., and F-1-plus by Fitch Investors Corp. The Series B notes are rated MIG-2 by Moody's , SP-1 by Standard & Poor's, and F-1-plus by Fitch. The Series C notes are also rated MIG-2 by Moody's, SP-1 by Standard & Poor's, and F-1 by Fitch.
The Series V notes are rated MIG-2/VMIG-1 by Moody's, rated SP-1/A-1 by Standard & Poor's and F-1-plus by Fitch.
Long-Term Deals
An 11-member syndicate led by the First Boston Corp. priced and repriced $638 million Washington Public Power Supply System refunding revenue bonds.
At the repricing, Project No. 1 yields were lowered by 10 basis points from 1993 through 2000, and by five basis points from 2001 through 2006.
Yields were raised from 2009 to 2011, four basis points in 2015, and two basis points in 2017. Project No. 2 yields were lowered by 10 basis points from 1994 to 2000, and five basis points from 2001 to 2006.
The yield was raised by three basis points in 2012. Project No. 3 yields were lowered by 10 basis points.
The final reoffering included $281 million Nuclear Project No. 1 bonds priced to yield from 3.10% in 1993 to 6.45% in 2011. A 2015 term, containing $137 million of the loan, was priced as 6.50s, to yield 6.552%, and a 2017 term was priced as 5 1/4s, to yield 6.412%.
About $341 million Nuclear Project No. 2 serial bonds were priced at par to yield from 3.80% in 1994 to 6.25% in 2009. A 2012 term, containing $67 million of the loan, was priced as 6 1/4s to yield 6.50%. A non-callable 2012 term was priced as 6.30s, to yield 6.40%.
The remaining $14 million Nuclear Project No. 3 bonds were priced at par to yield from 3.10% in 1993 to 5.10% in 1998.
The 2003 through 2006 Project No. 1 and No. 2 bonds are non-callable.
The issue is rated double-A by Moody's, Standard & Poor's and Fitch, except for the Series A 2017 maturity and the Series B 2009 and 2010 maturities, which are insured by the Municipal Bond Investors Assurance Corp. The insured bonds are rated triple-A by all three ratings agencies.
A 23-member syndicate, led by Donaldson, Lufkin & Jenrette Securities Corp. as senior manager, priced and repriced $450 million Illinois State Toll Highway Authority toll highway priority revenue bonds.
At the repricing, yields were lowered by about three basis points in 2011 and 2012 and by 10 basis points in 2017. A 2015 yield, containing the bulk of the loan, was raised by about two basis points.
The final reoffering included a 2010 maturity priced to yield 6.35%, 2011, and 2012 maturities priced as 6.30s to yield 6.32%. There also was a 2013 maturity priced to yield 6.49%, a 2015 maturity, containing $156 million of the loan, priced as 6 3/8s to yield 6.52%, a 2016 maturity priced as 6.20s to yield 6.40%, and a 2017 maturity was priced as 5 3/4s to yield 6.45%.
The bonds are rated A1 by Moody's, A-plus by Standard & Poor's, and AA-minus by Fitch.
Lehman Brothers also priced and repriced $246 million City and County of Denver, Colo., special facilities airport revenue bonds for the United Airlines Project.
At the repricing, the reoffering yield was raised by five basis points.
The offering, subject to the federal alternative minimum tax, included a 2032 bullet term maturity, priced with a coupon of 6.875% to yield 7.20%.
The bonds are rated Baa2 by Moody's and BBB-minus by Standard & Poor's.
Bear, Stearns & Co. as senior manager priced and repriced $141 million Cook County, Ill., general obligation bonds.
Yield were lowered by as much as 10 basis points on the short end of the loan, and as little as one point on the long end.
The final reoffering included serial bonds priced to yield from 2.90% in 1993 to 6.19% in 2009.
The issue is insured by the Financial Guaranty Insurance Co. and is triple-A rated by Moody's Standard & Poor's, and Fitch.
An issue of $200 million Hawaii GOs were priced and repriced by Merrill Lynch & Co. The firm also boosted the amount of the loan from $100 million.
At the repricing, some yields were lowered two to five basis points
Non-callable serial bonds were priced to yield from 4.60% in 1997 to 6.125% in 2012.
The issue is rated double-A by Moody's and Standard & Poor's.
Smith Barney, Harris Upham & Co. priced and repriced $115 million student loan bonds for the Cincinnati, Oh., Student Loan Funding Corporation.
At the repricing, yields were lowered by five basis points in 1997, 1998, and 2005.
The final reoffering scale included serial bonds, subject to the federal alternative minimum tax, included $104.5 million Series C student loan revenue refunding bonds priced at par to yield from 5.25% in 1997 to 6.35% in 2005. The remaining $10.4 million Series D bonds were priced at par to yield 6.60% in 2005.
Moody's and Fitch rate the Series C bonds triple-A. The Series D bonds are rated A by Moody's and A-plus by Fitch.
Secondary Market
Municipal tone was nervous after the bulk of new deals were priced and Treasury prices retreated briefly.
The employment component of the September Chicago Purchasing Managers report jumped, and traders worried that the improvement meant an unfavorable employment report Friday. The Treasury market has been stronger this week in anticipation of a favorable jobs report and an expected Fed ease.
"The market won't trade out of this range until Friday," a trader said. "But these numbers worry me. It's questionable about what will happen now on Friday."
But the Treasury market, the gained its confidence and ended mixed ahead of the employment report.
In the debt futures market, the December municipal contract settled down 8/32, to 96.00. The MOB spread widened to negative 298 from negative 296 Tuesday.
Traders reported moderate bid-wanted activity as institutions dump holdings in quarter-end selling.
In secondary dollar bond trading, prices were quoted unchanged to down as much as 1/2 point.
Chicago GO AMBAC 5 7/8s of 2022 were quoted at 93 1/4-94, to yield 6.384% and Puerto Rico GO 6s of 2014 were quoted at 94 7/8-95 1/8, to yield 6.44%.
Short-term note yields fell 10 basis points on the day, traders said.
In late action, Los Angeles Trans were quoted at 2.73% bid, 2.70% offered.
