A disappointing Treasury auction pushed municipal prices 1/4 point lower on average yesterday, and traders reported a heavy tone as visible supply totaled $5.9 billion--a high for the year.
The first leg of the Treasury's $38 billion annual refunding soured late in the session, and the government long bond fell more than a point. But tax-exempts lagged significantly, with some high-grade yields up only three basis points in the intermediate range. Off-the-run names were down as much as 3/8 point on the day.
In the debt futures market, the December municipals contract settled down 11/32, to 94.15. The December MOB spread was calculated at negative 135.
Market participants have plenty to think about: The Fed failed to intervene again yesterday, economic news looms, and President Bush said he would not support a tax cut. But new issues have taken center stage.
"There are a lot of deals coming, and issuers are happy to be in the market with rates this low," said a New York-based bond trader. "Deals are getting done and underwriters are minimizing risk, which make the buyers happy."
The Bond Buyer's 30-day visible supply stands at $5.89 billion -- a new high for this year and the highest mark since 1986, when a whopping $8 billion was set for sale.
Market participants still report good investor demand for new issues, but note that inquiry is specific and retail buyers are more scarce.
In negotiated new-issue activity yesterday, Prudential Securities reported $163 million of San Diego County Water Authority certificates of participation oversubscribed at a maximum yield of 6.50% in 2008.
The offering included serial maturities priced to yield from 5.25% in 1995 to 6.50% in 2008.
The issue is rated Aa by Moody's Investors Service. A-plus by Standard & Poor's Corp., and AA-minus by Fitch Investors Service.
The authority's last COP issue was marketed May 12, 1989, by Prudential-Bache Securities. The offering was priced with a maximum yield of 7.20% in 2004, while the revenue bond index was 7.38% and the general obligation bond index was 7.18%.
In other activity, Donaldson, Lufkin & Jenrette Securities Corp. tentatively priced and repricxed $196 million of Piedmont Municipal Power Agency, S.C., electric revenue bonds to raise yields five basis points in 1998-2001.
The final pricing included serials priced to yield from 5.80% in 1998 to 6.50% in 2007.
A 2013 term is priced to yield 6.67%, while term bonds in 2014-2018 are priced to yield 6.625%.
The issue is insured by FGIC and bears triple-A ratings from Moody's, Standard & Poor's, and Fitch.
Lehman Brothers as senior manager tentatively priced and repriced $99 million of Tacoma, Wash., electric system revenue bonds to lower yields 12.5 basis points in the 1991b SAVRS 2015 maturity and raise yields 9.4 basis points in the 1991C RIBs 2015 maturity.
The final pricing included $14 million of serial bonds priced at par to yield from 5.65% in 1997 to 6.55% in 2006.
There are $42 million of select auction variable-rate securities priced at par to yield 4.50 in 2015 and $42 million of residual interest bonds priced at par to yield 8.181%.
The issue is insured by AMBAC Indemnity Corp. and bears triple-A ratings from Moody's and Standard & Poor's.
In lighter competitive action, $76 million of Clark County, Nev., limited tax general obligation street improvement and street refunding bonds were won by a Merrill Lynch & Co. group with a true interest cost of 6.421%.
Merrill reported an unsold balance of $10 million late in the session.
The bonds were reoffered to investors at yields ranging from 4.25% in 1992 to 6.45% in 2005.
A 2010 term is priced as 6 1/2s to yield. The 2006 and 2008 maturities were not formally reoffered.
The 2003-06 and 2010 maturities are insured by MBIA and carry triple-A from both Moody's and Standard & Poor's. The remaining bonds are rated A1 by Moody's and A-plus by Standard & Poor's.
In follow-through business, Bank of America, senior manager for $441 million of California general obligation and housing bonds, reported an unsold balance of $24 million late in the session.
First Boston, senior manager for $272 million of Georgia general obligation bonds, reported an unsold balance of $28 million.
Goldman Sachs reported an unsold balance of $10.3 million from $158 million of Missouri third state building general obligation refunding bonds.
Lehman Brothers, senior manager for $124 million of New Hampshire Housing Finance Authority single-family residential mortgage bonds, reported an unsold balance of $7 million.
Secondary trading was moderate as market players focus on new issues, but there were two bids-wanted lists that saw action. Traders reported one list out from a bank totaling 35 items in the $100 million range and a sizable list of California names.
In dollar bond trading, prices were unchanged to off as much as 3/8 in spots, depending on the name.
North Carolina Eastern 6 1/2s of 2017 were quoted at 96 1/2-5/8 to yield 6.77%. Denver Airport 7 3/4s, due 2021, were quoted at 92 1/4-1/2 to yield approximately 8.44%. Washington Public Power Supply System 6 7/8s of 2017 were quoted at 99-1/8 to yield 6.94% and Massachusetts Water Resources Authority 6 1/2 of 2019 were quoted at 94 5/8-3/4 to yield 6.92%.
In short-term note trading, yields were mostly unchanged to slightly lower in spots.
In late secondary trading, Los Angeles Trans were quoted at 4.00% bid, 3.95% offered. Pennsylvania Tans were quoted at 4.12% bid, 4.10% offered and March New York State Trans were quoted at 4.88% bid, 4.85% offered.
In prerefunded bond trading, bonds with national names callable in 1995 were quoted at 5.23% bid, 5.20% offered, while bonds callable in 1996 were quoted at 5.28% bid, 5.25% in late trading.
First Boston priced $54 million of Jefferson Parish, La., sales tax drainage bonds.
The offering included serial bonds priced to yield from 4.60% in 1992 to 6.10% in 2001.
A 2006 term is priced as 6 1/2s to yield 6.659% and a 2011 term is priced as 6 1/2s to yield 6.752%.
The bonds are AMBAC-insured and carry triple-A ratings from Moody's and Standard & Poor's.
George K. Baum tentatively priced $58 million of Cape Coral, Fla., Health Facilities Authority hospital revenue bonds for the Cape Coral Medical Center project.
The offering included serials tentatively priced to yield from 6% in 1994 to 7.35% in 2002.
A 2011 term is priced to yield 7.50%, while the 2020 and 2021 terms were not formally reoffered.
The issue is srated Baa by Moody's and BBB by Standard & Poor's.
Goldman Sachs announced yesterday that it will market $423 million of New York State Metropolitan Transportation Authority Transit and Commuter Facilities 1987 service contract bonds on Tuesday, Nov. 12.
The deal was originally slated for sale this week, but the MTA delayed the pricing because bond raters have not concluded their review of New York State's plan to close its budget gap, according to an MTA official.
Edward Armendariz, the authority's finance director, said that because the refunding bonds rely on annual state appropriations for security, "the rating agencies wanted to get comfortable with the state's gap-closing plan" before they rate the refunidng bonds.
State budget officials last week announced New York faces a projected $689 million budget gap in fiscal 1992, which began April 1. The state is expected to announce its gap-closing plan later this week or next week.