The bid for tax-exempts improved Friday, but players were content to quit early with modest price gains ad wait for this week's new deals to test price levels. About $5.2 billion of otes and bonds are slated for sale this week.
Thursday's improved tone spilled over into Friday's session, despite some signs of economic strength.
New orders for durable goods in August advanced 2.0% to a seasonally adjusted $131.2 billion, helped by a healthy gain in transportation equipment. The gain was slightly higher tha market expectations, but traders iterpreted the data excluding the transportation gains, rendering the report harmless.
Traders reported some short-covering after the number, and prices firmed 1/8 to 1/4 in spots.
Trading activity was scattered throughout the remainder of the sesion. Activity died down early in the afternoon,thanks to the Yom Kippur holiday.
Treasury bonds came off their highs and municipals responded only marginally. By session's end, prices were narrowly mixed on the day, traders said. High-grade bond yields were unchanged on the day.
In the debt futures marker, the December municipal contract settled up 4/32 to 104.03, down from a high of 104.07. The MOB spread widened slightly to negative 457 from negative 454 Thursday.
Secondary supply began to fall as the market improved, reflected by The Blue List, which dropped $45 million, to $1.79 billion Friday. The decline was the first in 10 trading sessions.
Also reflecting the better tone, underwriters freed new deals to trade Friday, and prices generally rose.
For example, PaineWebber Inc. released $167 million Detroit, Mich. Convention Facility limited tax revenue refunding bonds to trade. Late in the session, the 5 1/4s of 2012 were quoted at 96 1/4-1/2 to yield 5.5%. The bonds were originally priced to yield 5.625%.
In other dollar bond trading, South PUB 5 1/8s of 2032 were quoted down 1/8 at 5.51%-lock; South Carolina PSA FGIC 5s of 2025 were quoted up 1/8 at 5.36% bid, 5.34% offered; and Washington Public Power Supply System 5 3/8s of 2015 quoted up 1/8 at 5.56% bid, 5.54% offered.
Looking ahead, the economic calendar holds little for the markets until next week, when players will get a look at the latest employment figures. The results of new deals will play a key roll this week, traders said Friday, considering buyers have generally held off, waiting for this week's new issue slate.
"We've been thinking the buyers have been setting up for this week's calendar," said one trader. "But the money flows we've seen have been negative. That tells me the underprinting of the market is not as secure as we might think."
The Bond Buyer calculated 30-day visible supply at $6.07 billion Friday, a relatively modest level.
Bond and note deals expected this week total about $5.2 billion, according to figures compiled by the Bond Buyer.
The competitive sector features $800 million of California general obligation bonds; $335 million of [ILLEGIBLE WORDS] bonds; $300 million of Washington State GOs; and $167 million of Long Beach, Calif., revenue bonds.
The negotiated sector is dominated by $350 million of California State Public Works Board lease revenue refunding bonds, to be priced by Lehman Brothers; $250 million of Kentucky Housing Corp. housing revenue bonds, to be priced by Bear, Stearns & Co.; $225 million of Tarrant County Water Control District, Tex., revenue bonds to be underwritten by a syndicate headed by PaineWebber Inc.
On the economic front, the calendar holds enough indicators to grab the market's attention, traders said Friday. But the most important number for the near term, they added, would be the employment report on Oct. 8.
This week's economic calendar includes September econsumer confidence, to be released tomorrow, followed by revised second quarter gross national product data on Wednesday. On Thursday, releases include the Chicago Purchasing Management Survey, August new home sales, and the personal income report.
