About $2 billion of new deals dominated a trendless market yesterday, while prices were rangebound in dull trading.
Near-term price prospects have been clouded recently by numerous uncertainties, including inflation worries and the outcome of the Washington, D.C., budget process.
The horizon seemed to brighten Tuesday when a plunge in gold prices combined with renewed optimism about the chances for deficit reduction.
But tax-exempts significantly lagged Treasury gains on the news, leaving the market to wait for more fresh news.
Tax-exempt market players spent yesterday's session trading familiar blocks of bonds in dull action, waiting for a trend to present itself.
Prices made gains of 1/4 to 3/8 point early yesterday after the index of April leading indicators edged up a scant 0.1 %, reflecting a struggling economy.
But most of those gains evaporated after it was reported that sales of new single-family homes in April soared 22.7%. to a seasonally adjusted annual rate of 751,000, the hottest sales pace in over six years.
The big surge had the potential to damage bond prices, but the credit markets held in, viewing the report largely as an aberration.
By session's end, tax-exempts were quoted unchanged to 1/8 point higher with a firm tone. High-grade bonds were said to be about five basis points lower from last Thursday's close, thanks to well received new issues.
In the debt futures market, prices were knocked around in volatile trading. The September contract settled up 3/32, to 100.12.
The September MOB spread narrowed to negative 331 from negative 334.
In lieu of significant price moves, market players yesterday concentrated on a deluge of new deals that hit the market in a post-holiday rush.
Bond deals generally came cheap, market players said, as issuers continue to tap the market, hoping to beat the possibility of higher interest rates.
A quick look at upcoming supply reveals more deals on the way.
The Bond Buyer yesterday calculated 30-day visible supply at $9.2 billion, up from $9.06 billion Tuesday.
New Deals
Topping negotiated action, a syndicate led by First Boston Corp. as senior manager priced and then restructured $705 million Puerto Rico various revenue and revenue refunding bonds.
At the restructuring, 2009 and 2010 serial maturities were added to the scale, while a 2015 term maturity was also added to the Series M scale.
Series L bonds from 2007 through 2010 and in 2021 were not formally reoffered to investors. Series M bonds from 2007 through 2010 and in 2016 were not reoffered.
Two types of derivatives were included on the issue. An official with the authority said the derivatives portion was limited because the Commonwealth of Puerto Rico chose not to guarantee any swap payments. The deal was not insured.
"We were looking for buyers who could take the underlying credit on the derivatives," Gregory Kaufman, executive vice at the Government Development Bank for Puerto Rico, said.
For the roughly $80 million of bonds due in 2007 and 2008, First Boston used a structure the firm calls Tax Exempt Components that is similar to Lehman Brother's "Strips and Pieces."
Once the bonds are reoffered, investors will have the option to sell individual coupon payments due on certain dates, as well as to sell the principal. An investor could create an interest-only strip or a principal-only strip or a hybrid, according to an official on the deal.
The bonds are noncallable, avoiding some of the complications in the Lehman product that allow for holders of interest-only strips to receive some compensation if the bonds are called.
The authority will apply a fixed rate of 5.575% on the 2007 maturity and 5.625% on the 2008 maturity, a savings of about seven to 10 basis points compared with an ordinary structure, officials on the deal said.
The $46 million of bonds due in 2016, Series M, were structured as leveraged inverse floating rate notes.
The payout on the notes is based on the PSA Swap Index. As the index moves down, investors receive 1.5% for every 1% decline in the index.
The authority locked in a synthetic fixed rate on the notes for five years with a swap of 5.70%, a savings of 15 basis points. After five years, the notes convert to fixedrate securities.
The final reoffering scale included $127 million Series L revenue refunding bonds for the Puerto Rico Public Buildings Authority, priced to yield from 4% in 1996 to 5.60% in 2006. A 2016 term, containing $44 million of the loan, was priced as 5 3/4s to yield 5.85%.
There also was $577 million of Series M Public Education and Health Facilities refunding bonds, priced to yield from 4.60% in 1998 to 5.60% in 2006. A 2015 term, containing $152 million of the loan, was priced as 5 3/4s to yield 5.85%, and a 2021 term, containing $82 million, was priced as 5 1/2s to yield 5.85%.
Bonds in both series from 2004 through 2010 are non-callable.
The issue is rated Baal by Moody's Investors Service and A by Standard & Poor's Corp.
Piper, Jaffray Inc. priced and repriced $298 million non-callable Iowa School Corp. warrants certificates.
At the repricing, the reoffering yield was lowered by about five basis points.
The final offering included a 1994 maturity, which was not formally reoffered to investors and another 1994 maturity, containing $298 million of the loan, which was priced with a coupon of 3.60% to yield 3.35%.
The offering is insured by Capital Guaranty Insurance Co.
The managers said they expected Standard & Poor's to rate the issue SP-1-plus. Moody's did not rate the offering.
Lehman Brothers as senior manager priced and repriced $266 million Austin, Tex., Combined Utility System revenue refunding bonds.
At the repricing, serial bond yields were lowered by five basis points from 2000 through 2007. Term bond yields were lowered by about three basis points in 2013 and by about five basis points in 2016. Zero coupon bond yields were lowered by five basis points in 1998.
The final offering included serials priced to yield from 3.60% in 1995 to 5.70% in 2007. A 2013 term was priced as 5 3/4s to yield 5.877% and a 2016 term was priced as 5 5/8s to yield 5.90%. There also was $66 million non-callable capital appreciation bonds priced to yield from 4.70% in 1998 to 5.95% in 2010.
The issue is rated single-A by Moody's and Standard & Poor's and A-plus by Fitch investors Service.
Smith Barney, Harris Upham & Co. priced and repriced $146 million Allegheny County, Pa., airport new-money and refunding revenue bonds, subject to the federal alternative minimum tax, for the Pittsburgh International Airport.
At the repricing, Series 1993A yields were lowered by five basis points in 2002 and 2003 and in 2007 and 2008, and by three basis points in 2016. Series 1993B yields were lowered by five basis points in 2007 and 2008, by about 10 basis points in 2013, and by about 11 basis points in 2019. Series C yields were lowered by five basis points in 2002 and 2003, and in 2007 and 2008. The 2013 yield was lowered by 11 basis points, while the yield in 2023 was lowered by 10 basis points.
The final reoffering included $38 million Series 1993A refunding bonds priced to yield from 2.95% in 1994 to 5.75% in 2008 and 5.97% for term bonds in 2016. There were $33 million Series 1993B refunding bonds, priced to yield from 5.50% in 2004 to 5.75% in 2008. A 2013 term was priced as 5 5/8s to yield 5.95% and a 2019 term was priced as 5 5/8s to yield 5.99%. Finally, there was $76 million Series C new money bonds priced to yield from 4.10% in 1996 to 5.80% in 2008. A 2013 term was priced as 5 5/8s to yield 5.99% and a 2023 term, containing $40 million of the loan, was priced as 5 5/8 to yield 6.07%.
The Series 1993A bonds are insured by the Municipal Bond Investors Assurance Corp, the Series 1993 bonds are insured by the Financial Guaranty Insurance Co., and the Series C bonds are insured by Financial Security Assurance. The issue is rated triple-A by Moody's and Standard & Poor's.
Merrill Lynch & Co. priced and received the verbal award on $145 million Kissimmee, Fla., Utility Authority electric system improvement and refunding revenue bonds.
The offering included serial bonds priced to yield from 3.90% in 1996 to 5.55% in 2009. A 2012 term was priced with a coupon of 5.375% to yield 5.630%; a 2015 term was priced as 5 1/2s to yield 5.65%, and a 2018 term was priced as 5 1/4s to yield 5.68%.
The bonds are FGIC-insured and rated triple-A by Moody's, Standard & Poor's, and Fitch.
In light competitive action, $173 million Commonwealth of Pennsylvania general obligation full faith and credit bonds were won by a Merrill Lynch group with a true interest cost of 5.32%.
The firm reported an unsold balance of about $19 million late in the session.
Serial bonds were reoffered to investors at yields ranging from 2.70% in 1994 to 5.60% in 2013.
The issue is rated Al by Moody's and AA-minus by Standard & Poor's.
Traders reported a mostly lackluster session, with few sizable blocks of bonds changing hands. The Blue List of dealer inventory rose $4.3 million, to $1.5 billion.
In secondary dollar bond trading, prices were quoted unchanged to 1/8 point higher.
In late trading, Farmington, N.M., MBIA 5 7/8s of 2023 were quoted at 100-1/8 to yield 5.87%; California Water 5 1/2s of 2023 were quoted at 5.80% bid, 5.77% offered; and Texas Municipal Power MBIA 5 1/4s of 2012 were quoted at 5.75% bid, 5.70% offered.
New York City 6s of 2021 were quoted at 6.20% bid, 6.19% offered; Washington Public Power Supply System MBIA 5.70s of 2017 were quoted at 97-3/8 to yield 5.86%; and Chicago GO FGIC 5 5/8s of 2023 were quoted at 96 1/8-1/4 to yield 5.90%.
In short-term note trading, yields were unchanged to five or 10 basis points higher on the day.
In late action, California notes were quoted at 3.10% bid, 3.00% offered; New York State notes were quoted at 2.35% bid, 2.30% offered; and Texas notes were quoted at 2.30% bid, 2.25% offered.
