Municipal prices rose 1/8 to 1/4 point yesterday before the Treasury auction halted the market's meteoric rise.
The tax-free market opened stronger in the morning, fueled by strong investor demand for a limited amount of bonds and bullish market players.
Traders reported a substantial amount of bid-wanteds in the secondary and there were sizable blocks of bonds up for sale but bids were reportedly strong.
Activity slowed, however, when the Treasury market retreated during the auction of $10.5 billion of five-year notes, and near session's end a nervous tone had settled into the market.
"The reversal in the government market is making people nervous," a trader said. "We held our gains, but I wouldn't want to test that bid. The market is way up there, and we're due for a correction. We're on shaky ground right now."
But municipal cash bonds held their gains, while the September municipal futures contract settled down 3/32, to 100.05. The MOB spread widened to negative 160 from negative 157 Tuesday.
Despite the nervous tone late in the day, market players reported good investor demand on new issues, which again were aggressively priced, pushing yields on long bonds well below 6%.
Leading negotiated action, the First Boston Corp. priced and repriced $341 million Wisconsin Transportation revenue bonds with a maximum yield of 5.98% in 2022.
Series A serial bond yields were lowered by five basis points, as were term bond yields, except for the yield on the 2022 maturity, which was lowered by about seven basis points. Longer serial maturity yields on the Series B bonds were lowered by five basis points, as were the term bonds, except for the 2022 term bond yield, which was also lowered by seven basis points.
The final reoffering scale included $140 million Series A bonds priced to yield from 4.95% in 1999 to 5.70% in 2006. A 2009 term was priced as 5.80s at par, a 2012 term was priced as 5 3/4s to yield 5.88%, and a 2022 term was priced as 5 1/2s to yield 5.912%. Also included was $201 million of Series B bonds priced to yield from 2.75% in 1993 to 5.70% in 2006. A 2009 term was priced as 5.80s at par, a 2012 term was priced as 5 3/4s to yield 5.88%, and a 2022 term was priced as 5 1/2s to yield 5.912%.
The bonds are rated A1 by Moody's Investors Service and AA-minus by Standard & Poor's Corp.
In other sizable action, a syndicate led by Goldman, Sachs & Co. priced and repriced $324 million Florida Municipal Power Agency refunding revenue bonds for the St. Lucie project.
At the repricing, serial bond yields were lowered by five basis points, as were term bond yields.
The final reoffering scale included serial bonds priced to yield from 2.70% in 1993 to 5.70% in 2007. A 2012 term was priced as 5 1/2s to yield 5.85%, a 2016 term was priced as 5.70s to yield 5.90%, and a 2021 term, containing $98 million of the loan, was priced as 5 1/4s to yield 5.85%.
The bonds are insured by the Financial Guaranty Insurance Co. and triple-A rated by Moody's, Standard & Poor's, and Fitch Investors Service.
Hamilton Investments Inc. priced $150 million of Chicago general obligation bonds.
The offering included serial bonds priced at par to yield from 4.40% in 1997 to 5.75% in 2007. A 2012 term, containing $27 million of the loan, was not formally reoffered to investors. A 2022 term, containing $85 million of the loan. was priced as 5 7/8s to yield 5.91%.
The bonds are insured by the AMBAC Indemnity Corp. and triple-A rated by Moody's and Standard & Poor's.
Piper, Jaffray Inc. priced and repriced $111 million of Bass Brook, Minn., collateralized pollution control revenue bonds for the Minnesota Power & Light power project to lower the reoffering yield by about one basis point.
The final offering included a 2022 term priced as 6s to yield 6.008%. The issue is rated A2 by Moody's and A-minus by Standard & Poor's.
Competitive action was light, but $124 million Rhode Island and Providence Plantations general obligation bonds were won by a Smith Barney, Harris Upham & Co. group with a true interest cost of 5.5032%.
The firm reported an unsold balance of $41 million late in the session.
Serial bonds were priced to yield from 2.60% in 1993 to 5.70% in 2012. The issue is rated A1 by Moody's and AA-minus by Standard & Poor's and Fitch Investors Service.
In follow-through business, First Chicago Capital Markets freed $323 million Missouri refunding general obligation bonds from syndicate restrictions. In late secondary trading, the 5s of 2010 were said to be trading at the original reoffering yield of 5.60%.
Lehman Brothers, senior manager for $206 million Jacksonville Electric Authority refunding revenue bonds for the St. Johns River Power Park system, freed the issue from syndicate restrictions. In late secondary trading, the 5 1/2s of 2014 were quoted 95 5/8-3/4 to yield 5.85% on the bid side, where they were originally priced to yield 5.982%.
In follow-through business in the competitive sector, Bank of America, senior manager for $198 million Los Angeles, Calif., judgment obligation bonds, reported all bonds sold and the account closed.
In other secondary dollar bond trading, Los Angeles Department of Water and Power 6s of 2032 were quoted at 99 3/4-7/8 to yield 6.01% on the bid side and Osceola, Fla., 6.10% in 2017 were quoted at 101 1/4-1/2 to yield 6%.
In the short-term note market, prices were mixed on the day, traders said.
In late action, Iowa Trans were quoted at 3% bid, 2.95% offered, Los Angeles Trans were quoted at 2.82% bid, 2.80% offered, and Wisconsin notes were quoted at 2.88% bid, 2.85% offered. New York City Tans were quoted at 2.80% bid, 2.70% offered and New York State Trans were quoted at 2.84% bid, 2.80% offered.
Porter, White & Yardley Inc. priced $66 million of Montgomery, Ala., Downtown Redevelopment Authority mortgage revenue refunding bonds.
The offering included serials priced to yield from 3.50% in 1994 to 5.80% in 2009 and 5.90% in 2013. The issue is MBIA-insured and triple-A rated by Moody's and Standard & Poor's.
Moody's Confirms SCPPA
Moody's Investors Service said it rated $475 million Southern California Public Power Authority's transmission project revenue bonds Aa, after withdrawing its rating just prior to the sale of the issue on July 10. Standard & Poor's affirmed its AA rating on Monday.