Bonds traded in a familiar range yesterday as players marked time ahead of new deals and economic reports that might move the market.
Friday's rally was short-lived as the market opened with a heavier tone ahead of nearly $7 billion of deals expected this week, and was then met by more signs of a stronger economy.
Total industrial capacity utilization jumped 0.5% to 82.4% from 81.9% in October, as auto producers went into high gear.
Industrial production, meanwhile, surged 0.8% in October, resulting primarily from a rebound in auto production. Higher car sales figures released later in the day added to the overall economic malaise for bond prices, traders said.
By mid-day, the bid for bonds was said to be about 1/4 point weaker. The futures markets fared no better, and the December municipal contract was quoted down 16/32 to 102.01 by mid-session. Some prices climbed back, in sympathy with the Treasury 30-year bond, which improved from its lows, but continued to move within a range of 6.10% to 6.25%.
By session's end, tax-exempt prices were quoted mixed on the day. High-grade
grade bond yields were unchanged, traders said. In secondary dollar bond trading, Chicago O'Hare MBIA 5s of 2018 were quoted at 5.60% bid, 5.58% offered, New York State Power 5 1/4s of 2018 were quoted at 96 1/2-97 to yield 5.51%, and Pittsburgh Water and Sewer FGIC 4 3/4s of 2016 were quoted at 5.44% bid, 5.41% offered. Florida Board of Education 5 1/8s of 2022 were quoted at 94 3/4-95 1/4 to yield 5.49%.
In the debt futures market, the December contract settled down 12/32 to 102.07. The MOB spread widened to negative 469 from negative 463 on Friday.
In the short-term note sector, yields were mixed, traders said. In late action, California revenue anticipation notes were quoted at 2.72% bid, 2.70% offered, New York City tax anticipation notes were quoted at 2.63% bid, 2.60% offered, and Pennsylvania Tans were quoted at 2.73% bid, 2.70% offered.
Overall, players had a list of reasons handy to do very little, including waiting for new-issue results, economic reports, and generally end-of-the-year defensiveness. Adding to caution, The Bond Buyer calculated 30-day visible supply at $8.38 billion, a daunting number of new offerings, considering the losses suffered over recent weeks, they said.
In light new-issue action, Bear, Stearns & Co. priced $451 million of Massachusetts Water Resources Authority general revenue bonds.
Officials at the water authority said the sale went "better than expected."
Authority and Lehman Brothers officials said that Friday's rating upgrade from Standard & Poor's Corp. and a week-long investor tour were the keys to increasing the amount of market demand.
"The noncallable portion of the loan really helped us to market this deal to investors," said James B.G. Hearty, a senior vice president at Lehman Brothers.
Standard & Poor's raised the authority's rating to A from A-minus. Moody's Investors Service and Fitch Investors Service also rate the authority A.
"We believe that the sale went very well," said authority treasurer Kenneth Wissman. "We benefited from the upgrade, of course, but we were also helped by pricing the deal on a Monday."
Wissman said with a heavy slate of deals on the municipal calendar this week, it was important to get the bonds sold yesterday before the onslaught of deals today and tomorrow.
Serial bond yields were lowered by five basis points from 1996 through 2000 and by two basis points in 2007, 2008, and 2011.
The final offering included serial bonds priced to yield from 2.75% in 1994 to 5.48% in 2008. A 2011 term was priced as 6s to yield 5.56%; a 2015 term, containing $96 million, was priced as 5 1/4s to yield 5.63%; a 2020 term, containing $134 million, was priced as 5 1/4s to yield 5.78%; and a 2023 term, containing $52 million, was priced as 4 3/4s to yield 5.70%.
In an ongoing debate, Massachusetts' Gov. William F. Weld and Treasurer Joseph D. Malone recently said that most deals in the state and its authorities should be done competitively.
Although Wissman noted the MWRA is planning a small competitive sale this summer, he said by selling yesterday's issue through a negotiated syndicate and adding the refunding bonds, the authority achieved over $3 million in present value savings.
This was the first bond sale for the MWRA's new underwriting and financial advisory team. Last summer, the authority disbanded its old underwriting team and fired its financial adviser, Mark S. Ferber, because of an undisclosed relationship between Ferber and Merrill Lynch & Co.