Prices closed unchanged Friday and market players said this week's $5 billion new issue slate will test investor interest in yields that are at or near record lows.
Municipals made gains all last week and the revenue and 40-bond indexes hit record lows. But trading volume was light, new issue results were mixed, and secondary supply climbed in a string of slow, summer sessions.
Traders opinions varied about the market's near-term price prospects, even though investors were thought to have plenty of money on hand to put to work.
Prices were bound to stay in a range, many said, unless a surprise surfaced.
Traders said the results of this week's new issues, dominated by $1.1 billion New York Power Authority bonds, would most likely give the market its near-term direction.
That theory seemed to hold Friday when tax-exempts barely budged, while the Treasury market recorded losses of as much as 1/2 point.
Municipals were quoted unchanged to down 1/8 point in spots, traders said.
Traders reported spotty secondary action and a neutral tone. They said they saw some sizable blocks of bonds out for the bid, including $20 million Salt River Arizona 5s of 2029. But, they added, the selling did not represent any significant move lower.
Reflecting the increase in dealer holdings, The Blue List of dealer inventory rose $12.4 million, to $1.68 billion. The list has risen $470 million from the $1.22 billion on Aug. 13.
But, reflecting the market's underlying strength, bonds freed to trade on Friday posted as much as 3/8 point gains from the original issue levels.
Merrill Lynch & Co. freed $239 million Los Angeles County Public Works Financing Authority capital construction and refunding bonds from syndicate restrictions.
In late secondary trading, the 5s of 2017 were quoted at 5.50% bid, 5.48% offered, where they were originally priced to yield 5.50%.
Kidder, Peabody & Co. freed $182 million Rhode Island Convention Center Authority refunding revenue bonds to trade.
The MBIA 5s of 2020 were quoted at 5.55% bid, 5.54% offered late in the day. The bonds were originally priced to yield 5.58%.
In other secondary dollar bond trading, prices were quoted narrowly mixed on the day.
In late action, Cook County, Ill., GO 5 3/8s of 2018 were quoted at 5.55% bid, 5.52% offered; Philadelphia Water MBIA 5 1/4s of 2023 were quoted at 5.53% bid, 5.50% offered; and Fulton-Dekalb Hospital MBIA 5 1/2s of 2020 were quoted at 99-1/2 to yield 5.57%.
In the short-term note sector, yields were mostly unchanged on the day.
Late in the day. California notes were quoted at 2.78% bid, 2.75% offered and New York State paper was quoted at 2.60% bid, 2.50% offered.
Looking ahead, The Bond Buyer calculated 30-day visible supply at $6.04 billion Friday.
Just over $5 billion of new bond and note deals is expected to be priced this week.
The negotiated slate is topped by $1.1 billion New York State Power Authority general purpose bonds, to be priced by PaineWebber Inc. The calendar features other sizable offerings, including $510 million Los Angeles County Convention Center and Exhibition Authority refunding certificates of participation, and $450 million South Carolina Public Service Authority revenue bonds, to be priced by Goldman, Sachs & Co.
The competitive calendar is dominated by $156 million Virginia Housing Development Authority revenue bonds and $93 million Georgia general obligation bonds.
The short-term sector features $170 million Maine GO tax anticipation notes, to be priced by A.G. Edwards & Sons, Inc.
The economic calendar features few important reports, except for durable goods orders, to be released Wednesday, followed by weekly initial jobless claims on Thursday.
