Abundant Cash Props Up Munis; 'Everybody' Buys TBTA Offering
Tax-exempts were mostly unchanged yesterday, with traders reporting little activity in the secondary market because the evident buying interest was unwilling to push yields still lower.
After a flurry of tiny issues and one very large one, the only price erosion was about 1/8 point on the more actively traded secondary market issues.
From a pricing perspective, the market barely noticed the day's huge $561.87 million Triborough Bridge and Tunnel Authority general purpose revenue sale. One trader likened the deal to a "Greg Louganis" dive.
"The amount of money continues to boggle the mind," he said. "You can slip $500 million into the market and there's hardly a ripple."
The Triborough Bridge sale was brought by a Dillon Read & Co.-led negotiated syndicate with a maximum yield of 6.75% in the 2019 term. Moody's Investors Service rates the issue Aa; Standard & Poor's Corp. gives it an A-plus.
The deal was priced in a $25.39 million W series and a $536.348 million X Series, both of which are callable in 2002 at 101.5, with the exception of the Series X's noncallable 2010-11 terms and the 2014 -- the deal's largest maturity at $107 million -- which is callable at par in 2002.
The majority of noncallable bonds are in the 2010 Series X, but these highly sought municipals were not reoffered.
Traders said the deal was priced exactly where the New York market is currently trading, and the response was strong across the board, with interest exhibited "top to bottom." An official at Dillon Read said "everybody" was buying the deal. An unsold balance was not available late yesterday.
One trader dealing specifically in New York paper said the sector did not soften at all when the Tribes hit the screens, with some issues gaining an 1/8 and others dropping 1/8. "There's not much float in general on the long end of the market," he said.
The secondary market, in fact, continued to hold steady. Institutional buying in the Triborough Bridge and other new issues was propping up prices, but it was not the kind of demand that could move the market forward, sources said.
Part of the reason, according to one institutional salesman, was that underwriters have been aggressively pricing most deals for the last week. "They all got big prices, very high prices," he said.
Dollar bonds were mostly flat on the day. New Jersey Turnpike Authority 6.90s of 2014 were quoted at 99 7/8-100 to yield 6.89%. Triborough Bridge and Tunnel Authority 6 5/8s of 2017 were quoted at 99 1/8-99 1/4 to yield 6.69%. New York LGAC 7s of 2021 were quoted at 99 3/8-5/8 to yield 7.03%. East Bay California 6 1/2s of 2016 were quoted at 98 3/8-3/4 to yield 6.60%.
Other new issues yesterday included a split-rated $54.6 million New Jersey Economic Development Authority gas facilities revenue competitive issue, won by Dillon Read at a true interest cost of 6,986%. The maximum yield on the sale was 6.9% in the 2021 maturity.
PaineWebber Inc. preliminarily priced San Francisco's $15.36 million certificates of participation issue with a maximum yield 6.68% in the 2016 term maturity. The par-priced serials were scaled from a 4.60% coupon in 1992 to a 5.85% coupon in 1999.
The Virginia Housing Development Authority sold $15 million of mortgage revenue bonds through Craigie Inc. sole competitive management. The maximum yield on the par bonds is 2017's 6.65% coupon, while the issue is callable in 2000. Serials were priced from 4.25% in 1992 to 5.80% in 2000.
A $15 million Adams County, Colo., hospital revenue issue also was sold yesterday. Co-managed by Stephens Inc. and Merchant Capital Corp., the bonds, rated Baa by Moody's., were priced with an 8.10% maximum yield in the 2016 term maturity. Serials were scaled from 6% in 1994 outto 7.2% in 2001.
And four underwriters co-managed the competitive sale of Shelby, Mich.'s $12.48 million building authority bonds, which carry AMBAC Indemnity Corp. insurance and are rated triple-A. Kemper Capital Markets, Michigan National Bank, Ohio Co., and Rodman & Renshaw participated.
The near-term bonds were premiums with 10.75% coupons, but 1993-96 serials were not reoffered. In all, 18 of the 25 maturities were not reoffered. The deal was won at a net interest cost of 6.436%.
The short-term market scored slight gains or held steady. In late trading, Los Angeles notes were quoted at least five basis points lower in yield, at 4.30% bid, 4.28% offered. March New York State Trans were quoted at 5.04% bid, 5.00% offered. Pennsylvania paper was flat at 4.38% bid, 4.35% offered. And Texas notes were quoted at 4.33% bid, 4.30% offered in late cash trading.
Yesterday's debt futures trading settled lower, with the December municipal contract closing about 1/8 lower at 94.20. The MBO spread held fast at negative 168.