The wait for today's June employment report and the July 4 holiday kept issuers home yesterday, but they won't be staying on the farm much longer.
"It's going to be a busy summer," one high-grade source said.
"I think issuers are really aware of how much cash is around," she said, adding that spreads have been tight on new issues.
The source also pointed out that many market participants are on vacations.
As for the employment report, the concensus forecast called for a 130,000 gain in nmonfarm jobs, down from more than 200,000 for each of the previous two months.
"I think it's going to be critical in determining the course of interest rates, and, in turn, the tempo of corporate bond borrowing for the next month," John Lonski, senior economist at Moody's Investors Service, said of the number.
Some economists, Lonski among them, see the increase in the number of jobs coming in below the consensus forecast.
"I'm going to go with the bears on this one," he said.
Lonski sees an increase of 110,000 nonfarm jobs in June, about half of the more than 200,000 new jobs each month in April and May. The number will reinforce notions of sluggish economic growth through most of the third quarter, he said.
The Moody's economist also cited the employment component of yesterday's June Purchasing Managers' Index, which came in at 42.4%, down from 43.4% in May. That June reading, one of the lowest in the past two years, "reinforces expectations of a limp jobs [number] for June," he said.
With expectations tilting heavily toward a weak number for today, Lonski warned that a bigger-than-expected rise in jobs could make the bond market more vulnerable to a sell-off than otherwise.
As for corporate issuance in July, Lonski sees a "robust" pace.
"With borrowing costs likely to remain near their most recent lows, bond issuance should proceed at a pace that is well above its historical average." he said.
In related action, Securities Data Co. reported Wednesday that the first half of 1993 saw 1,661 U.S. new straight-debt issues that raised more than $237 billion, up 50% from last year's first-half record of $157 billion. Those figures exclude mortgage and asset-backed debt.
Issuance, however, did taper off in the second quarter compared to the first. Securities Data's figures show $108 billion in the second quarter, down from $129 billion in the first.
"It seems the stronger economy and higher-than-expected inflation figures jolted the market," Securities Data said in a release. "Analysts remain confident the inflationary uptick will not have much of an effect on debt issuance, which is expected to remain strong for the rest of 1993."
Merrill Lynch & Co. once again dominated debt underwriting, credited with $56 billion, or 24%, of the market. Goldman, Sachs & Co. finished a strong second with $43 billion, or 18%, of the market. Lehman Brothers finished third, with $32 billion, or 13%.
Junk bonds raised a record $26 billion in the first six months of 1993, which already totals 66% of all of last year's record $38 billion. Issuance ebbed slightly in the second quarter, most likely because companies have already taken advantage of lower rates and refinanced. the release says.
"As long as interest rates remain low and investors remain hungry for higher yields, the junk bond market should flourish," Securities Data's release says. "Additionally, if merger and acquisition activity picks up in 1993 as expected, acquisition financing could spawn a large group of new junk bond issues."
In other news, a judge denied a bid by four institutional investors to postpone Marriott Corp.'s annual meeting.
According to Marriott spokesman Robert T. Souers, four investors -- HB Korenvaes Investments L.P., the President and Fellows of Harvard College, AKT Associates L.P., and UBS Securities Inc. -- tried to stop the company from holding its annual meeting on July 23. Each of the four holds Marriott preferred stock.
"We are pleased with Judge [William] Allen's decision," Souers said, adding that Marriott has maintained from the outset that the plaintiffs' claims lacked merit.
Marriott is now free to proceed with the meeting, at which there will be a stockholder vote on whether to split the company in two through a special dividend, he said.
In secondary trading, spreads on high-grade bonds were unchanged. Junk was also unchanged.
New Issues
Federal Home Loan Banks issued $257 million of 5.215% notes due 1998 at par. Noncallable for a year, the notes were priced to yield 19 basis point spread over comparable Treasuries. Merrill Lynch managed the offering.
Federal Home Loan Banks also issued $245 million of 4.41 % notes due 1996. Noncallable for a year, the notes were priced initially at par to yield a 10 basis point spread over comparable Treasuries. Goldman Sachs managed the offering.
United Telephone Co. of Florida issued $135 million of first mortgage bonds in two parts.
The first part consisted of $60 million of 6.875% bonds due 2013. The noncallable bonds were priced at 98.665 to yield 7% or 32.5 basis points over comparable Treasuries. Lehman Brothers Inc. won competitive bidding to underwrite the deal.
The second piece consisted of $75 million of 7.125% bonds due 2023. The noncallable bonds were priced at 98.849 to yield 7.22% or 55 basis points over comparable Treasuries. Merrill Lynch won competitive bidding to underwrite it. Moody's rates both pieces A2, while Standard & Poor's Corp. rates them A.
Continental Broadcasting issued $120 million of 10.625% senior subordinated notes due 2003 at par. The notes are callable after five years at 105.25 moving to par in 2001. Moody's rates the offering B3, while Standard & Poor's rates it B-minus. Merrill Lynch lead-managed the offering.
Rating News
Standard & Poor's upgraded Southland Corp.'s senior unsecured debt to BB-plus from B-plus and its subordinated debt to to BB-plus from B.
The rating agency removed the ratings from Creditwatch, where it placed them on Sept. 14. Standard & Poor's also affirmed Southland's A-1-plus commercial paper program. The program was not on Creditwatch, owing to the guarantee of unrated parent Ito-Yokado Co. Ltd., which owns 69.98% of Southland. The implied senior secured rating is BBB-minus.
"The upgrades reflect the company's improving financial profile, as well as greater support from Ito-Yokado than had been factored into previous ratings," the release says. "Since its acquisition of Southland in March 1991, Ito-Yokado has actively aided Southland in its efforts to reverse the fortunes of its core Seven-Eleven convenience store operations in the U.S. and Canada, which had been suffering from the financial burden of a 1987 $4.9 billion leveraged buyout transaction and difficult convenience store industry conditions."
