Municipal cash bonds closed unchanged to slightly weaker yesterday after Friday's sharp losses.
Price movements provided no meaningful conclusions. The market was "absolutely dead," one trader said. Another trader said, "It's so quiet, it's ridiculous."
Dollar bonds were quoted down 1/8 point overall, while more actively traded issues ended unchanged. Yields on high-grade issues were also unchanged. In debt futures, the September municipal contract closed up nearly 1/4 point to 91 5/32s. Yesterday's September MOB spread was negative 388, compared to negative 389 on Friday. The 30-year Treasury bond ended up 2/32 to yield 7.53%.
Players this week will be watching the Treasury Department's August refunding, as well as keeping an eye out for a possible fifth tightening of credit by the Federal Reserve this year.
"It's all the same old stuff -- it's back on tap," a trader said. A municipal analyst also cited the release of the producer price index on Thursday and the consumer price index on Friday as possible key role players.
The Treasury Department is slated to sell $40 billion of notes and bonds in its quarterly refunding this week to raise roughly $10.4 billion in new cash and redeem $29.6 billion of securities maturing Aug. 16.
The department will auction $17 billion of three-year notes today, $12 billion of 10-year notes tomorrow and $11 billion of 30 1/4-year bonds to sold on Thursday.
Traders yesterday said a tightening of short-term interest rates by the Fed is on deck again, given last Friday's stronger than expected July employment report. Opinions varied about the timing of the Fed's next move, but most traders said it was anyone's guess. One trader said he had been expecting a Fed move yesterday, which would have gotten it over with before the refunding.
As for selling yesterday, a municipal trader described it as "moderate."
"We saw, I would say, probably a dozen or so institutional bid lists,"he said. The trader estimated the lists ranged from $3 million to $7 million each.
"There were some lists, but not overwhelming lists," the municipal analyst said.
While both agreed that money is out there, investors are being "really finicky at this point," the trader said.
In competitive action today, Massachusetts will sell $250 million of general obligation bonds, while Connecticut will sell $185 million bonds tomorrow.
"It's always good to have a light calendar," Massachusetts Deputy Treasurer Ken Olshansky said yesterday,"The less competition from other issuers the better I like it."
Because investors don't have much product to choose from, "they'll be more interested in Massachusetts," Olshansky said.
The state's last general obligation offering was a $200 million deal sold Jan. 19. The issue had a top yield of 5.35% in 2014, Olshansky said. Today's offering will also have 2014 as its longest maturity. While Olshansky declined to speculate as to what today's top yield will be, he expects "aggressive pricing."
In negotiated action today, the New York State Housing Finance Agency is expected to sell $100 million of AMBAC-insured multi-family housing revenue bonds through Bear, Stearns & Co. today.
Clark Wagner, chief investment officer at First Investors Management Co., doesn't see much in this week's new issue fare to interest him. The competitive GO deals are likely to come at "fairly aggressive" levels, he said, adding that with supply so low underwriters have to bid fiercely if they want to win business.
"So it just gets pushed a little too high," Wagner said. As for the negotiated side, there' is only one offering of any size, he said, adding that some smaller deals such as the Cleveland, Ohio, airport system's $77 million offering could generate some interest.
In the short-term sector, New York City will sell $2.2 billion of notes at auction tomorrow. The deal will contain three maturities. Those bidding on the $800 million June 30, 1995 maturity will be able to bid on notes tied to the Public Securities Association's municipal swap index, the constant maturity Treasury rate, or the London Interbank Offered Rate.
Meanwhile, New York State continues to consider a refunding of its general obligation debt, originally postponed due to a delay in adopting a state budget, state officials and Wall Street executives say.
In January, state officials said that they Were planning a $700 million refunding of the state's general obligation debt. Lehman Brothers was appointed as the transaction's lead manager.
At that time, officials needed the legislature to pass enabling legislation, which they eventually received as lawmakers passed the state's fiscal 1995 budget. The legislature passed the budget in June, more than two months after the start of the state's fiscal year on April 1.
But with the legislation out of the way, the state then faced another obstacle: sharply higher interest rates. High interest rates reduced the amount of money the state would save from the refundings.
As a result, state officials are no longer committing to a timetable for the deal, simply saying that the refunding issue remains under consideration.
The size of the deal is also likely to change. According to Wall Street sources familiar with the transaction, the state now eying a refunding in the $300 million to $400 million range.
In other news yesterday, Standard & Poor's Corp's Blue List grew by about $60 million to $1.71 billion from $1.65 billion on Friday. The measure of dealer inventories has not been that high since July 29 when it was $1.88 billion.
Future primary supply has been moving in the opposite direction as The Bond Buyer's 30-day visible supply declined for the fourth consecutive day. Forward new issues fell $120 million on Monday to $2.88 billion, the lowest level since July 7's $2.65 billion. The measure of future supply has been under $5 billion for 13 straight days and for a total of 89 days so far this year. In all of 1993, it was under $5 billion 78 times.
Charles Gasparino contributed to this report. Volume at a Glance Long-Term Municipal Issues ($ Bil.) (Private Placements Included) January 17.11February 16.19March 17.23April 11.67May 13.93June 15.55July 13.05August 1-5 3.08 Source: Securities Data Co.