Barrage of Data To Test Market; New-Issue Slate Hits $4 Billion

The municipal market landed on its feet friday after a topsy-turvy week, and market players say they will look to this Friday's employment data for near-term price prospects.

According to several analysts, the tax-exempt market should closely mirror other markets this week and react to a full slate of economic indicators.

Kevin Flanagan, money market economist at Dean Witter Reynolds Inc., said that investors will get an early read on the state of the economy this morning with the release of the report by the May National Association of Purchasing Managers.

He said that although the managers report is something of a wild card, last Friday's revision of first quarter gross domestic product suggested that the recovery will not be as speedy or as dramatic as the Bush administration has predicted.

"Last week, Michael Boskin, the chief economist for the country, had us believing that the revision of GDP will be significant, and instead it's 0.4%," Mr Flanagan said.

"I heard from several people that GDP would be revised to show between a 3% and 4% increase, one guy even had the revision at 5%," he said. "People feel like they've been snowballed."

Mr Flanagan expects slight improvements in both the April report of leading economic indicators and sales of single-family homes, which will have little effect on either the government or municipal markets. Another analys said the lack of Treasury supply should indirectly bolster the tax-exempt market.

Highlighting the week's varied menu of economic indicators is May employment on Friday morning.

Several analysts contend that economic recovery will be signaled when the unemployment rate drops for more than a single month. Unemployment fell in April to 7%, but according to analysts, the figure must continue to contract for a true recovery.

"A pileup of positive or negative economic news will make Friday one of the more important days of the year," he said. "A positive week of numbers could lead to a five or 10 basis point swing ahead of Friday's May employment figures."

During April, non-farm payrolls rose 126,000, but Mr. Flanagan says that figure will not be as strong in May. "We are expecting a rise of between 75,000 and 85,000," he said . " A reading under 100,000 should be friendly for prices."

Mr Flanagan said that a weaker than expected report on the employment situation would be a disappointment for Federal Reserve officials and may force them into action.

Looking to supply, $4 billion of new deals will hit the market this week, according to preliminary figures compiled by The Bond Buyer last week. The figure was called manageable by several traders, although they added that they though the deals would be priced to sell because of the barrage of economic data.

The negotiated calender features $506 million Puerto Rico Highway and Transportation Authority highway revenue and refunding bonds, to be priced by a syndicate led by Lehman Brothers, $474 million Pennsylvania Intergovernmental Cooperation Authority special tax revenue bonds, to be priced by Smith Barney, Harris Upham & co., and $248 million Charlotte-Mecklenburg Hospital Authority, N.C., Heath Care System revenue bonds, to be priced by Paine Webber general obligation bonds will be priced by Lehman Brothers.

The competitive slate features only one sizable deal. Baltimore County, Md., will market $173 million of various-purpose bonds on Wednesday. Fitch Investors Service rates the bonds AAA.

Historically, the month of June features a rush of short-term deals, and this week the calendar is dominated by $155 million Monroe County, N.Y., 12-month various anticipation notes and $130 million of San Bernardino County, Calif., 12-month various anticipation notes, which will be sold competitively. An issue of $100 million San Diego Area Local Governments, Calif, pooled tax and revenue anticipation notes, will be priced by Sutro & Co.

Friday's Market

Prices improved with the Treasury sector on Friday, but trading was light ahead of the weekend.

Traders reported increased secondary trading during the morning session at up levels, and prices generally improved 1/8 point on average and added 1/8 point gains later in the afternoon.

Reflecting the more bullish psychology, Standard & Poor's Blues List of dealer inventory fell $15 million to $1.4 billion.

In follow-through business, J.P. Morgan reported $74 million remaining from $275 million Washington, D.C., GO bonds.

First Boston announced an unsold balance of $59 million from $ 93 million Florida full faith and credit bonds on Thursday. On Friday morning, a representive of the firm said the bonds were sold and the account is closed.

The representative said the firm decided to move the bonds into the secondary market in hopes of improved conditions in the next weeks, and the long bonds, which made up the bulk of the balance, were trading 10 basic points higher.

In secondary dollar bond trading, prices were unchanged to up 1/8 to 1/4 point.

Greater Orlando Aviation Authority AMT insured 6 3/8s , of quoted at 97-1/4 to yield 6.60%, New York State Power Authority 61/4s of 2023 were quoted at 971/4-3/8 to yield 6.41%, South Carolina PSA 6 5/8s of 2031 were quoted at 98 5/8-99 to yield 6.72%. Oklahoma Turnpike Authority AMBAC 6 1/4s of 2022 were quoted at 97 1/4 - 1/2 to 6.45%.

Short-term traders reported a quiet session with yields down about five basis points on most issues. One trader said that investors have been bracing for the past week for next week's pricing of over $750 million notes.

Late in the session, California Rans 3 1/4s were quoted at 3.60% bid, 3.55% offered; Los Angeles Trans 5s were quoted at 3.55% bid, 3.50% offered: Pennsylvania Tans 5 1/4s were quoted at 3.57% bid, 3.54% offered; and New York State Trans 3.65s were quoted at 3.25% bid, 3.21% offered.

N.J. Health-Care Woes

Standard & Poor's said Friday that a recent federal court ruling may, in its strictest interpretation, invalidate New Jersey's hospital payment system, including uncompensated care financing through the Health Care Trust Fund.

The agency said it views this ruling as further indication that the future of the New Jersey hospital rate regulated reimbursement system is in question. Failure to resolve the issues in a timely fashion without jeopardizing hospitals' financial positions "may cause ratings downgrades" either in aggregate across the state or on an individual basis, the agency said.

The Tribrough bridge and Tunnel Authority next week will sell $480 million special obligation bonds, to be priced by a syndicate led by Dean Witter and Dillon Read & co. as managers.

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