Municipal market participants spent the second straight day in the trenches of the primary sector yesterday, but prices survived unscathed.
About $1.6 billion was priced yesterday, following Monday's rush to sell over $700 million of municipal debt.
Even with the deluge of deals, market tone held firm and several deals were repriced, with yields lowered a few pegs. Prices in the secondary were 1/2 point higher.
"There are new bonds all over the place," said the head of a New York trading desk. "The secondary market has been pretty quiet all week, but prices have hung in there very well in the primary sector."
"We've been looking for paper for the last couple of weeks," said a trader. "These deals are flying out the door."
Market participants were roundly cheering the performance of the market on Monday and Tuesday.
This was an optimistic stance, especially in light of the fact that one of the largest deals of the year - $1.29 billion North Carolina Municipal Power Authority revenue and refunding bonds - is scheduled to hit the Street today.
A pricing scale was unavailable yesterday. The Bond Buyer's 30-year revenue bond index was 6.57% on Nov. 12, down 13 basis points from 6.70% the week before.
Looking ahead to the power authority's deal has been the preoccupation of many traders this week.
On Sept. 22, the North Carolina Eastern Power Supply System, a sister authority, priced and then pulled a $1.3 billion revenue bond deal from the market due to unfavorable market conditions.
But all sources said market conditions appear to be much better for a deal of this size and credit quality.
But the North Carolina deal is not the only large issue expected to be priced today.
On the competitive side, an issue of $400 million California general obligation bonds are set to be priced.
Market participants said the issue should be digested better than the state's $1.3 billion GO offering last month. Some market players and investors said the deal was priced too aggressively and some buyers balked at buying the paper.
But yesterday some traders noted that the California issue should benefit from in-state investor demand for the securities because the bonds are exempt from both federal and state taxes.
Some fund managers, however, still expressed reservations about purchasing California paper that could be priced too aggressively.
But a warm reception last week for the state's public works board sale may be a good omen for today's GO sale.
In forward supply, 30-day visible supply was reported down $264 million, to $8.02 billion. Dealer supply, as charted by the Blue List, was was up $54.3 million to $993 million.
Primary Sector Jump
Both the negotiated and competitive sectors saw sizable deals priced yesterday.
An issue of $250 million Texas Public Finance Authority, State of Texas general obligation refunding bonds were priced and repriced by a group led by Smith Barney, Harris Upham & Co.
The offering was split into two sections.
The first part was comprised of $239 million current interest bonds and included serial bonds priced to yield from 2.65% in 1993 to 5.45% in 2001.
There were also two term bonds included in the deal.
The first term matures in 2012 and was priced as 6s to yield 6.30%. The second term matures in 2020 and was priced as 51/2s to yield 6.35%.
This section of the loan was rated Aa by Moody's Investors Service and AA-plus by Fitch Investors Service.
The second portion of the loan was made up of $11 million premium capital appreciation bonds.
This section included serial bonds priced to yield from 6.05% in 2002 to 6.65% in 2010 and was FGIC-insured and triple-A rated.
At the repricing, yields were lowered by five basis points in the 1993 and 1994 maturities of the current interest bonds.
Yields were raised from five to 10 basis points in the capital appreciation bonds.
An issue of $154 million Johnson Co., Kansas internal revenue and refunding bonds Series 1992A and 1992B was priced and repriced by a group led by Smith Barney.
The loan was split in two sections.
The first part contained $147 million Series 1992A bonds and included serial bonds priced to yield from 3.40% in 1994 to 6.20% in 2009.
There was also a term bond maturing in 2012 that was priced as 6 1/8s to yield 6.25%.
The second portion of the loan consisted of $7 million Series 1992B bonds. This section included serial bonds priced to yield from 2.70% in 1993 to 6.20% in 2009. There was also one term bond maturing in 2012 that was priced as 6 1/8s to yield 6.25%.
The loan was rated Aa by Moody's Investors Service.
At the repricing, yields were lowered by 10 basis points in the 1994 and 1995 maturities of the Series 1992A bonds, and 10 basis points in the 1993 maturity in the 1993 maturity of the Series 1992B bonds.
An issue of $107 million Huntsville, Ala., general obligation warrants Series 1992A, 1992B, and 1992C were priced by a group led by Merrill Lynch & Co.
The offering was split into three portions. The first, $50 million Series 1992A bonds, included serial bonds priced to yield from 2.80% in 1993 to 6.05% in 2006.
There were also two term bonds. The first matures in 2009 and was priced as 6.20s but was not formally reoffered to investors.
The second term matures in 2012 and was priced as 61/8s to yield 6.30%.
The second portion of the loan, $20 million Series 1992B bonds, includes serial bonds priced to yield from 3.60% in 1994 to 6.00% in 2005.
There were also two term bonds in this portion of the loan. The first term matures in 2008 and was priced as 6.10s to yield 6.15%. The second term matures in 2013 and was priced as 6 1/8s to yield 6.30%.
The third portion of the loan was structured as $36 million of Series 1992C bonds. This portion of the loan contained serial bonds priced to yield from 5.30% in 200 to 6.05% in 2006.
There were also two term bonds in the Series 1992C part of the deal. The first term matures in 2011 and was priced as 61/8s to yield 6.25% and the second term matures in 2015 and was priced as 6 1/8s to yield 6.35%.
The loan was double-A-rated by Moody's and Standard & Poor's.
An issue of $90 million Lehigh County Industrial Development Authority, Pa., pollution control revenue and refunding bonds, Series 1992A were priced and repriced by a group led by First Boston Corp.
The MBIA-insured, triple-A rated offering consisted of one term bond maturing in 2021 and priced at par to yield 6.40%.
At repricing, the yield was lowered five basis points.
For the first time in seven years, Michigan State University yesterday returned to market, selling an issue of $83 million Board of Trustee general revenue bonds, Series 1992A.
The offering included serial bonds repriced to yield from 3.65% in 1994 to 6.25% in 2010.
There were also three term bonds included in the offering.
The first term matures in 2015 and was priced as 6 1/4s to yield 6.35%, the second term matures in 2016 and was nor formally reoffered to investors, and the third term was priced as 5 1/2s to yield 6.35%.
The offering was rated AA-minus by both Fitch and Standard & Poor's and A1 by Moody's.
In the competitive sector, an issue of $124 million Pennsylvania GOs was won by a group led by Goldman, Sachs Co., with a true interest cost of 5.7657%.
The loan was priced to include serial bonds priced to yield from 2.80% in 1993 to 6.25% in 2012.
The bonds were rated A1 by Moody's and AA by Standard & Poor's and Fitch.
Late in the session, a representative of the Goldman Sachs' underwriting team reported an unsold balance of $20 million.
Also priced in the competitive sector was an issue of $110 million New York State general obligation environmental quality bonds.
The deal was won by Goldman Sachs, with a true interest cost of 5.8623%.
The loan contained serial bonds priced to yield from 2.90% in 1993 to 6.30% in 2012 and was rated A by Moody's and A-minus by Standard & Poor's, and A by Fitch.
Late yesterday, a spokesman for Goldman Sachs reported an unsold balance of $3 million.
An underwriter in the syndicate said there was a lot of retail interest in the offering.
Two other groups bid on the bonds, according to a spokesman for the state comptroller's office. A PaineWebber Inc. group bid at TIC of 5.8929% and a J.P. Morgan Securities Inc. group bid a TIC of 5.9161%, the spokesman said.
The state last sold GO bonds on Sept. 23, when a group led by First Boston won $189 million of bonds with a TIC of 5.6959%. The bonds had a maximum yield of 6.35%, the comptroller's spokesman said.
Troubled Cities Price Deals
Oppenheimer & Co. won $34.3 million of Jersey City, N.J., bond anticipation notes yesterday, with a net interest cost of 3.2788%.
A second piece of the $42.5 million deal, $8.2 million in tax refunding notes, was won by Chemical Securities, with a net interest cost of 3.8528%.
Troubled Philadelphia recently sold $100 million of notes with a yield of 2.98%. But the notes had a letter of credit from Canadian Imperial Bank of Commerce.
Comments from Jersey City's newly inaugurated mayor, Bret Schundler, cast a shadow on the deal last week, according to market participants.
During his inaugural speech last Monday, Schundler said the city was in a dire fiscal situation and would need extensive cooperation from the state to avoid bankruptcy by summer, which would leave about $600 million in outstanding debt in the state's hands.
City officials said they were concerned the remarks would mean they would have to pay a market penalty on yesterday's deal.
But Jane Feigenbaum, Jersey City's director of finance, said yesterday she does not think the deal, which was rated MIG-2 by Moody's Investors Service and SP-1 by Standard & Poor's Corp., suffered as a result of the mayor's speech.
Feigenbaum noted there were six bidders on the larger portion of the deal, generating bids ranging from the winning 3.278% to 3.450%.
The notes came under the state Qualified Bond Act, which adds security to the issue by dedicating a stream of state aid payments to debt service.
Also priced yesterday was an issue of $21 million New Haven, Conn., GO bonds.
Merrill Lynch was senior manager for the offering. Officials there could be reached for comment. New Haven officials did not return phone calls.
The offering, which was rated Baa by Moody's and BBB-minus by Standard & Poor's, was divided into two parts.
The first was comprised of $15 million Series 1992B bonds and included serial bonds priced to yield from 4.875% in 1995 to 6.75% in 2006.
The second portion consisted of $6 million taxable general obligation bonds. This portion contained serial bonds priced to yield from 6.00% in 1994 to 7.75% in 1997.
The Bond Buyer's 20-Bond Index of general obligation yields was calculated on Nov. 12 at 6.38%.
Jim Bosland, a fund manager for the Private Bank, a division of the Bank of Boston, said even the high yields available on the New Haven offering did not entice him to purchase the bonds.
"It's uninsured and unenhanced. I don't think it's a good credit," the fund manager said. "It's just a deteriorating story,"
Bosland pointed to the lack of big industry in the city, it's little used port, and Yale University's large block of tax-exempt property as negatives for the city's economy.
"I don't see anything good coming out of New Haven," the portfolio manager added.
Secondary traders said that market was somewhat quieter than the primary sector, but there were some small lists out for the bid yesterday morning.
In futures, the December municipal contract settled up 18/32, to 96.09. The MOB spread was measured at negative-236, down from minus-246 Monday.
Prices were generally 1/2 point higher on the day.
In late action, Piedmont Municipal Power Agency MBIA 6.30s of 2022 were quoted at 98 1/2-5/8 to yield 6.41%; California Public Works AMBAC 6.40s of 2016 were quoted at 100-1/4 to yield 6.39%; and California GO 6 1/4s of 2019 were quoted at 6.45% bid, 6.43% offered.
New York City Water and Sewer 6 3/8s of 2022 were quoted at 97 1/2-5/8 to yield to yield 6.56%; Puerto Rico GO 6s of 2014 were quoted at 95-1/4 to yield 6.43%; and Florida Board of Education 6s of 2025 were quoted at 951/2-3/4 to yield 6.32%.
In the short-term note trading, yields were lower on the day.
In late trading, Los Angeles Trans were quoted at 2.82% bid, 2.79% offered; New Jersey notes were quoted at 2.80% bid, 2.75% offered; and Pennsylvania Tans were quoted at 2.85% bid, 2.80% offered.
Texas Rates Well With Fitch
Fitch Investor's Service has assigned a AA-plus rating to Texas general obligation bonds, giving the state its highest rating since the 1980s oil bust claimed its triple-A.
The rating, the first for Texas published by Fitch, took effect Oct. 26 but became generally known only yesterday as the Texas Public Finance Authority priced a $250 million GO refunding deal for the Superconducting Super Collider project.
Connecticut is the only other state with a AA-plus rating from Fitch.
"I think Texas right now looks very good," said Claire Cohen, executive vice president at Fitch. "I think the state has a lot going for it."
State officials greeted the rating - just one tick from AAA - as an endorsement of the state's fiscal practices and generally conservative debt management.
" I totally agree with her," said Tom Pollard, executive director of the Texas Bond Review Board, which oversees state bond issuance. "I think we have been showing the rating agencies that Texas, relative to other states, is doing well."
The state is currently rated double-A by both Moody's Investors Service and Standard & Poor's Corp.
Texas was triple-A rated by those agencies until the global energy market collapse in 1986 crippled the state's finances.
Staff'reporters Steven Dickson, Sharon King, Dennis Walters, and John Racine contributed to this article.