Municipal prices moved higher yesterday, but traders reported a quiet session ahead of this morning's jobs report for July.
Prices were up 1/8 to 1/4 point overall, with a few selective dollar bonds as much as 1/2 point higher, traders said.
The September municipal bond contract was a big winner on the day and settled up 10/32, to 101.27.
The September MOB spread fell to negative 432, from negative 445 on Wednesday. This suggests a significantly stronger performance on the day in the municipal market than in the Treasury market.
The largest decline in the MOB this year came on March 25 and again on May 12, when the spread narrowed by 19 points.
Most participants said the tone of the market improved yesterday on reports that President Clinton's deficit reduction package has gained enough support to pass both the U.S. Senate and House of Representatives.
"Investors look at the passage of the package as a pretty significant event," the head of a trading desk said. "It looks like the package got the votes it needed earlier this week."
There was some speculation that the bill would not have enough Democratic support to move through the Senate. But on Wednesday, Sen. Dennis DeConcini, D-Ariz., said he would support the package, apparently giving Clinton's plan enough votes to take it over the top.
A slate of economic reports released yesterday morning did nothing to sway the mood of the market.
The Commerce Department reported that factory orders posted the year's biggest gains when they jumped 2.6% during June. Business inventories fell 0.1% during the month, which marked the first monthly decline since the January report.
But the tone of the market heading into next week will be set by this morning's report on July employment.
"We are expecting about a 175,000 increase in non-farm payrolls with an unchanged rate of unemployment," said Kathleen Stephanson, a senior economist at Donaldson, Lufkin & Jenrette Securities Corp. "That kind of report will suggest at least a modest reversal from June's dismal report."
During June, the nation's unemployment rate rose 0.1 percentage point, to 7.0% and nonfarm payrolls rose by only 13,000.
Stephanson said that if the July numbers come in as expected - right at the consensus level - it would not represent an earth-shattering event, but could cause some consolidation at present levels in the Treasury market.
"To signal a real turnabout in the jobs market, a 250,000 or greater increase would be needed," Stephanson said. "It doesn't look like this month's report will give the Federal Reserve anything to tighten monetary policy."
She said that next week's consumer and producer price indexes will be the next major hurdle for both the government and Treasury markets.
The forward calendar lightened up yesterday. The 30-day visible supply, as calculated by The Bond Buyer, was down $1.498 billion yesterday, to $5.37 billion.
Dealer supply, as reported in Standard Poor's Corp.'s The Blue List, was down $104.8 million yesterday, to $1.86 billion.
There were few large deals priced yesterday.
For the most part, deals that were priced during the morning were repriced with lower yields later in the day.
An issue of $492 million of Jacksonville Electric Authority revenue refunding bonds came off the day-to-day calendar and were senior managed by a group led by Lehman Brothers.
The proceeds from the sale will be used for the St. John's River Power Park system and the bonds are rated Aa1 by Moody's Investors Service and AA by Standard & Poor's.
The loan, which market sources said was bought on the wire, contained serial bonds priced to yield from 2.50% in October, 1993 to 5.55% in 2010.
There was also a term bond included in the offering. The term matures in 2013 and was priced as 5 1/2s to yield 5.65%.
"The deal performed very well," said a member of the Lehman underwriting team. "The issuer was looking for a certain target level and we hit it. "
In other sales, a group lead managed by Smith Barney Shearson priced and repriced an issue of $96 million of Tampa, Fla. solid waste system revenue refunding bonds, Series 1993.
The offering included serial bonds repriced to yield from 2.80% in 1994 to 5.40% in 2007.
At the repricing, yields were lowered by five basis points for the 2003 through 2007 maturities.
"The bonds were insured by Financial Guaranty Insurance Co. and triple-A rated by Standard & Poor's, Moody's, and Fitch Investors.
Now York City Offering
New York City yesterday mailed its preliminary officials statement for a $300 million general obligation bond deal slated for sale next week.
The issue will be senior-managed by two minority firms, the second time minority firms have been senior-managers and bookrunners on a New York City related bond financing.
The New York City Municipal Water Authority used a minority-owned firm to serve as senior manager and bookrunner on a revenue bond offering earlier this year.
City officials say the deal will mark the first time a minority firm has run the books on a city GO bond deal.
The firms, Pryor, McClendon, Counts & Co. and Grigsby Brandford & Co., are part of the city's emerging managers group, a special underwriting bracket designed to help minority bond firms enter the senior management ranks.
City officials say each firm will senior manage a $150 million portion of the bond deal.
Elsewhere in New York State, Thomas A. Devane, deputy executive director for planning and financial analysis at the New York State Dormitory Authority, yesterday said the authority postponed a $367 million state university revenue bond refunding due to market conditions.
Merrill Lycnh & Co. was senior manager of the offering, which had been tentatively scheduled for sale yesterday.
Devane said the pricing of the deal will be "day-to-day."
He added, however, that a rejection of the Clinton budget package would likely force the authority to cancel the refunding.
Devane said yields in the municipal market will likely spike if the budget-plan fails, reducing how much the authority will save through a refunding of older debt.
The authority expects to save between $13 million and $15 million, on a present value basis, Devane said.
Traders reported a fairly busy morning session, but action quieted down after about noon.
Actively quoted dollar bonds were anywhere from 1/8 to 1/4 point higher on the day.
In the cash market, Salt River 5 1/4s of 2019 were quoted at 5.69% bid, 5.66% offered; New York LGAC 5 1/2s of 2018 were quoted at 5.76% bid, 5.75% offered; and Cook County, Ill. MBIA 5 5/8s of 2018 were quoted at 5.78% bid, 5.76% offered.
Other quoted names included California Department of Water Resources 5 1/2s of 2023 were quoted at 5.70% bid, 5.66% offered; and Fulton De Kalb Co., Georgia Hospital Authority MBIA 5 1/2s of 2020 were quoted at 5.73% bid, 5.70% offered.
In the short-term market, yields were up 3 to 5 basis points in quiet trading.
California's RANs were quoted at 2.94% bid, 2.90% offered; Texas notes were quoted at 2.57% bid, 2.55% offered; and Wisconsin notes were quoted at 2.87% bid, 2.85% offered.