Municipals ended unchanged to slightly better yesterday ahead of today's June employment report.
"They're just waiting for the number," one trader said. Some participants judged the market unchanged, but one estimate had dollar bonds up 3/8s to 1/2 point..
Economists polled by the Bond Buyer see nonfarm payrolls increasing by at least ..... 285,000 jobs. A fair number of those economists believe jobs could show an increase of 300,000 or better. The civilian unemployment rate is expected to rise to 6.2% in June from 6.0% in May.
"The technical situation is still fairly positive for munis," a municipal trader said. "With the [nonfarm] number on consensus, this market has room to move higher."
Another trader said the municipal market seemed less nervous than the government market over the employment report.
In debt futures, the September municipal contract settled up more than 1/4 point to 89 22/32. Yesterday's September MOB spread was negative 382, compared to negative 388 on Wednesday.
Looking to next week, the New Jersey Economic Development Authority Wednesday is expected to price $700 million of bonds aimed at ending a standoff between the state and insurers over who should shoulder a deficit in an insurance pool covering bad drivers. Morgan Stanley & Co. will serve as senior manager.
The Authority will issue the series 1994 revenue bonds to help erase a $1.3 billion shortfall in its auto insurance pool, known as the Market Transition Facility.
Insurance companies, which sued New Jersey to avoid paying any portion of the deficit, agreed last month to drop the suit and put up more than $700 million toward the shortfall.
For its part, the state will issue the revenue bonds, to be paid off by bad driver surcharges assessed by the the New Jersey Department of Motor Vehicles.
"There's going to be a tremendous amount of pre-marketing that will go into it," Andrew Rowley, a managing director and director of Morgan Stanley's syndicate desk, said of the offering.
"Ifs a lot of bonds-in a more concentrated part of the yield curve," Rowley said, adding that the bonds are concentrated in the short to intermediate range.
Linda Fan, a principal at Morgan Stanley, said that since the deficit is a holdover from a previous administration, and sufficient revenue exists to pay off the bonds earlier rather than later, the bonds are more heavily concentrated in the short to intermediate range.
While retentions are usually given out the day of pricing, but "we are going to give out retentions early," RowIey said.
The other managers will get their retentions on Monday, he said, adding that they will be tailored to the underwriter's sales expertise.
The offering will consist of serial bonds starting with roughly $34 million in 1997 and increasing by $2 million to $3 million a year out to the 2009 maturity, which will contain about $64 million. A 2011 term will contain about $78 million.
"The issue will be insured by MBIA from top to bottom," Rowley said.
Rowley expects to see interest in the issue from the New Jersey funds, which have just under $4 billion in assets dedicated to them, and from intermediate funds. The deal is also likely to draw attention from insurance companies, because it fits their quality and maturity spectrum, Rowley said.
"We'll be taking a look at it," said Andy Jennings St., vice president and manager of municipal trading at Franklin Advisers. In addition to Franklin's more than $500 million New Jersey fund, Jennings said it would probably interest three other Franklin funds. Whether he buys it, however,"will be a function of price," Jennings said.
"You're buying triple-A bonds. So what else is there but price?" he said.
In competitive action yesterday, a Carmona, Motley & Co. group won $72.7 million New York State Dormitory Authority revenue bonds, bidding a true interest cost of 6.41725%.
A Reinoso & Co. group had the cover bid of 6.427543. Other bidding groups were headed by WR Lazard, Laidlaw & Mead; Artemis Capital Group; Pryor, McClendon, Counts & Co.; and Samuel A. Ramirez & Co. All of the firms are either minority-or women-owned, which was a requirement for the head of each syndicate, according to Thomas Devane, deputy executive director for planning and financial analysis at the dormitory authority. Devane added that it was not the first time the authority had fixed such a requirement.
"it went very well," Devane said. "We sent it out to 11 people [and] we got six [bids] back."
The authority also got "very aggressive pricing...6.41% is right on the market."
The AMBAC-insured offering contained serial bonds priced to yield from 4.20% in 1996 to 6.23% in 2014. The issue contained term bonds in 2016, 2018, 2020 and 2024. The 2024 maturity was priced to yield 6.32%.
Dealer inventories declined for the sixth straight day yesterday as Standard & Poor's Blue List fell $122 million, to $1.85 billion from $1.97 billion. The Blue List has not been that low since June 15, when it was $1.74 billion. In the past six days, the measure of dealer inventories has decreased $400 million.
The 30-day visible supply of municipal bonds for today totals $3.45 billion, up $800.1 million from yesterday.
