Prices were mixed yesterday and traders reported some nibbling by buyers, but big market plays were not to be found on the eve of today's employment report.
Breaking what has seemed like an eternity of dull sessions, traders reported some interest for bonds from legitimate buyers early yesterday. The tone firmed and some prices we re 1/8 to 1/4 point higher by session's end, despite a bigger-than-expected fall in weekly jobless claims. Debt futures prices were also higher. The December municipal contract settled up 3/32 at 104.13, up from a low of 104.09, but down from a high of 104.17. The MOB spread narrowed to negative 476 from negative 479 on Wednesday after government prices headed lower and municipals rose,
Market players ignored initial state unemployment insurance claims for the week ended Oct. 2, which fell 9,000 to a seasonally adjusted 320,000, the Labor Department reported.
The market remained in a 1/4-point range, despite the firmer tone, as bears continued to put bonds up for sale ahead of today's employment report. One firm estimated bid-wanteds at $160 million to $170 million.
"There was a lot out for the bid, but it didn't feel like it," one trader said. "We saw a small amount of traditional buying and some legitimate arbs were only a few ticks away from buying some bonds. There was some tire kicking today."
Some strength was evident when bonds from this week's $600 million New York City deal were freed to trade by senior manager Lehman Brothers. The bonds fared better in the secondary than many expected, traders said. In late action, longer bonds were said to be trading only 3/8 to 1/2 point lower than the original issue prices, while the shorter maturities were down only 1/8 to 1/4 from the original levels.
Also reflecting the slight pick-up in demand, The Blue List of dealer inventory fell below $2 billion for the first time in nearly a week. The list fell $112.2 million yesterday, to $1.89 billion, which was down $320 million from Friday's $2.21 billion.
In other secondary dollar bond trading, prices were mixed, with some bonds posting 1/8 to 1/4 point gains, while others lost the same amount of ground or were unchanged.
In late action, Port Authority of New York and New Jersey 51/8s of 2021 were quoted down 1/8 at 98 1/4-1/2 to yield 5.24%; California general obligation 4 3/4s of 2023 were down 1/8 at 90 7/8-91 1/4 to yield 5.36%; and Florida Municipal Power AMBAC 4 1/2s of 2027 were up 1/8 at 5.24% bid, 5.22% offered.
South Carolina PSA FGIC 5s of 2025 were quoted up 1/4 at 5.34% bid, 5.33% offered. Florida State Board of Education 5 1/4s of 2023 were quoted up 1/4 at 99-1/8 to yield 5.31%.
In the short-term note sector, yields were also mixed, with some up as much as 13 basis points and others down five.
In late trading, California Rans were quoted at 2.75% bid, 2.73% offered; New York State Trans were at 2.60% bid, 2.55% offered; and Texas Trans were 2.76% bid, 2.74% offered.
Looking to short-term supply, New York City plans to market $650 million tax anticipation notes next Thursday, Oct. 14.
In light new issue activity, Smith Barney Shearson Inc. priced and then restructured $315 million California non-callable State Public Works Board lease revenue bonds for the Department of Correction's state prison at Lassen County' Susanville.
At the restructuring, a 2012 maturity replaced a 2013 maturity. Smith Barney said it received the verbal award at the original price levels.
The final scale included serial bonds priced to yield from 3.70% in 1996 to 5.30% in 2008. A 2013 term, containing $78 million, was priced as 5 3/8s to yield 5.45%. A 2018 term, containing $102 million, was priced as 5 3/8s to yield 5.50%.
The bonds are rated A1 by Moody's Investors Service, A by Standard & Poor's Corp., and A-plus by Fitch Investors Service.