Municipal bond prices moved lower yesterday, pressured by bid lists and a weak Treasury market.
"I don't think there's anything extraordinary today," said one trader. "There have been a lot of [bid] lists again, and the market is probably down 3/8 on the day."
A municipal analyst said dollar bonds ended 1/4 point lower yesterday after being off by as much as 3/8 point. Yields on high-grade bonds were "a touch" higher, he said.
"Despite yesterday's losses, though, the analyst said he sees a relatively firm tone underlying the market.
"It seems that there's a little bit of business going on one way or the other," including some swapping, the trader said. "I don't want to say two-way flow because I think there's more selling than buying, but at least there has been a little bit of buying going on."
While he didn't tally yesterday's lists, the trader estimated about 12 of them out yesterday.
"Every day seems to be another wave Of people selling," he said.
In debt futures, the December municipal market was down more than 3/8 to 86 20/32. Yesterday's December MOB spread was negative 385, compared to negative 375 on Tuesday.
In the government market the 30-year bonds closed down 1/4 point to yield 7.88%
"If you had to point to one factor, it would be the dollar," said Michael J. Moran, chief economist at Daiwa Securities America Inc. However, Moran added, "I think what we are seeing is a general unwinding of the rally that we saw at the end of last week."
The economist said the bond market displayed a weakness yesterday that was similar to the negative bias on Monday and Tuesday. Moran said the dollar opened on a slightly weaker note yesterday, and the release of the August trade report reinforced the downward bias.
The Commerce Department yesterday reported that the U.S. trade deficit narrowed to $9.7 billion in August from $11.2 billion in July. The report came in line with expectations.
"The deficit improved from what we saw during the month of July, but it was still wide, and if you look at July and August together, we're seeing continued deterioration of the trade situation," Moran said.
"The average deficit in the third quarter is going to be wider than what we saw in the second quarter," he added.
He noted that the monthly average trade deficit for the first half of the year was $8.5 billion, which is considerably narrower than the gaps seen in both July and August.
"If you see an imbalance this wide, it suggests that this situation needs to be corrected through a softer dollar or a stronger [German] mark," Moran said, explaining yesterday's drop in the greenback.
In negotiated action yesterday, a CS First Boston group priced and repriced $238 million of Indianapolis Airport Authority special facilities revenue bonds for a Federal Express Corp. facility.
A source familiar with the offering cited "a substantial amount of bond fund and insurance company interest."
The offering, which is subject to the alternative minimum tax, consisted of a single 2017 maturity priced at 99 to yield 7.178%. At the repricing, the yield was lowered by close to four basis points. The bonds received a Baa2 rating from Moody's Investors Service and a BBB rating from Standard & Poor's Corp. The bonds are callable beginning in 2004 at 102, declining to par in 2006.
A second source said the bonds were offered in a single maturity because that's typically the way corporations issuing tax-exempt debt structure their deals.
Most corporations, he said, have bullet maturities because they want to get the full maturity out of the tax exemption. "A corporation tries to keep as large [an] amount outstanding for as long as possible," he said.
Prior to yesterday's offering, Federal Express had about $300 million of tax-exempt debt outstanding, the source said.
In a statement issued on Aug. 1, Indianapolis Mayor Stephen Goldsmith said the planned $210 million expansion of the Federal Express hub at Indianapolis International Airport is expected to be completed in June 1997. The expansion marks the largest single facility bond financing in Federal Express history, the release said.
Elsewhere in negotiated action yesterday, a Morgan Stanley & Co. group priced and repriced $103 million of Guam Power Authority revenue bonds.
The offering consisted of serial bonds priced to yield from 5.25% in 1997 to 6.05% in 2009. Bonds due in years 2001 to 2003, and in 2008 and 2009 were insured by AMBAC Indemnity Corp. A 2014 term, containing $17.5 million, was priced to yield 6.775%, while a 2024 term, containing $58 million, was priced to yield 6.875%.
At the repricing and restructuring, yields on the serial bonds from 2005 to 2008 were lowered by five basis points, while the yield on the 2009 maturity was lowered by 10 basis points. Yields on the 2014 and 2024 term bonds were lowered by 2.5 basis points each. In addition, insurance was removed from the 2004 maturity. Standard and Poor's assigned an underlying rating of BBB to the bonds.
A source familiar with yesterday's deal said "a broad breadth of investors" bought the bonds, and no balance remained by day's end.
The 30-day visible supply of municipal bonds yesterday totaled $3.17 billion, down $305.4 million from Tuesday. That comprises $1398 billion of competitive bonds, down $240 million from Tuesday, and $1.767 billion of negotiated bonds, down $65.5 million.
Standard & Poor's Blue List of municipal bonds was up $130.7 million yesterday to $2 billion.
