Bond prices took one last beating before the weekend Friday, this time at the hands of Federal Reserve Board Chairman Alan Greenspan.
Municipal traders reported a firm bid in the morning, in sympathy with the government markets up-tick on lower gold prices. But, adding to sharp losses suffered on Thursday, traders hit prices after Fed Chairman Greenspan said the economy was improving. He made the comments during an address to the Italian American Association.
The markets extended their losses throughout the day in light action. The 30-year Treasury bond was quoted at 5.97% late in the day. By session's end, tax-exempts were quoted down 3/8 on average but trading was spotty and other bonds fell further, players said.
In late secondary dollar bond trading, Florida Board of Education 5 1/8s of 2022 were quoted at 97 3/8-1/2 to yield 5.30%; Los Angeles DEWAP 5s of 2033 were at 94-3/8 to yield 5.36%; and New York City Group C 5 3/8s of 2022 were 5.75% bid, 5.70% offered.
In the debt futures market, the December municipal contract settled down 23/32 to 104.15, after posting a high of 105.14. The MOB spread narrowed to negative 462 from negative 469 on Thursday.
As to the fundamental outlook, the markets will get a taste of some potent economic reports this week on the heels of Greenspan's comments. Most important will be Wednesday's durable goods report and Thursday' gross national product report.
Municipals are also suffering from technical problems. Friday's losses came just as supply pressure threatens to take an even more severe toll on the market.
Reflecting heavier dealer inventories, The Blue List jumped'$194 million Friday, to $1.91 billion. Supply shows no immediate signs of dissipating. The Bond Buyer calculated 30-day visible supply at $7.11 billion Friday, up $1.097 billion.
Under supply's shadow, the market tone has soured as players, especially secondary traders, suffer from what one market observer called 'old sergeant's syndrome.'
"They've had a bellyfull," he said. "Dealers are bogged down by heavy inventories, suffered several precipitous price drops, and they just get sick of it. The trading edge is gone."
"These down days take a big toll on people's confidence," said a trader. "It just makes you want to lick your wounds and go home."
Investors have shunned many recent deals, while the flow of cash into funds has not been robust, players say.
"I can go three to four weeks without buying anything at this point," said one fund manager Friday. "At some point, logical price levels will prevail and right now that means munis are going to get even cheaper."
This week, $5.3 billion of note and bond deals are expected to come to market, as calculated by The Bond Buyer Friday.
The competitive slate includes a variety of sizable deals, most notably $430 million Salem County Pollution Control Finance Authority, N.J., refunding revenue bonds; $390 million Los Angeles, Calif, revenue refunding bonds; and $290 million South Carolina refunding bonds.
The negotiated calendar is dominated by $303 million Missouri Health and Education Facilities Authority revenue bonds, to be priced by Merrill Lynch & Co. as bookrunner, $295 million Pittsburgh Water and Sewer Authority, Pa., revenue refunding bonds, to be priced by Paine-Webber Inc., and $200 million Detroit, Mich., water system revenue refunding bonds, to be marketed through Goldman, Sachs & Co.