Municipals limped quietly into port Friday after foundering amid waves of supply all week but not before prices dropped again.
Action was light Friday, after a week of losses that saw The Bond Buyer's indexes jump more than 10 basis points.
Traders have attributed the plunge to an over-invested Street that had its hopes for a July rally crushed when buyers shunned their bond offerings.
Dealers had stocked up on bonds in June, running prices up to do it, hoping for increased investor demand from big July 1 bond calls and payments.
Making matters worse, the Treasury market, which had supported municipals, turned lower.
Tax-exempts lost more ground Friday, before the weekend gave market players a reprieve.
Prices were quoted down 1/4 to 1/2 point on average near the end of trading.
Bonds from new deals lost as much as 1 1/4 points from original levels when they were freed to trade, players said.
For example, bonds from a $778 million New York City general obligation deal sold by First Boston Corp. fell heavily.
The fixed-rate bonds, which were priced aggressively, were quoted at 6.02% bid in late trading. They were originally priced to yield 5.90%.
In other action, bonds from $643 million Pennsylvania Intergovernmental Cooperation Authority special tax revenue bonds also plummeted in the secondary.
MBIA 5 5/8s of 2023 were quoted at 5.82% bid, less 1 1/4 late in the day, where they were originally priced to yield 5.82%.
Suffering even more, traders said, were yields on bonds due in 2000 from a $419 million Washington GO deal. Players said the bonds were offered 15 basis points higher than the original 4.60% yield.
Debt futures prices, meanwhile, fared better than cash thanks to short covering, traders said.
The September municipal contract settled down only 6/32 to 100.13. The MOB spread narrowed to negative 427 from negative 441.
Municipal Market Data Co. noted Friday that the improved bid is probably coming from dealers rolling out of tax-free hedge positions into the Treasury market. MMD speculated dealers figure many of next week's new refunding issues could be pulled from the market, easing supply pressure.
That might mean municipals could outperform Treasuries on the downside, which is typical of how the markets usually behave.
But despite last week's price adjustments and the prospect of lighter supply, the Street was still awash in bonds Friday.
Reflecting the heavy tone in the secondary market, The Blue List of secondary dealer inventory for sale rose $57.3 million to $2.16 billion, a high for the year and the highest since March 23, 1987, when it totaled $2.98 billion.
Traders said prices will probably go lower still until the market chops through enough bonds to balance supply and price levels against investor demand.
Looking to supply, the forward calendar has eased for the time being, but the market is still scheduled to take on $7.8 billion of new bonds and notes this week, much of which is concentrated in the competitive sector.
More competitive offerings could mean less flexibility for issuers in the weak market, making prices more vulnerable if investors continue to be picky.
Excluding the week of July 4, weekly note and bond sales have not been under $5 billion since the week of April 5, when they totaled $2.65 billion.
Further ahead, The Bond Buyer calculated 30-day visible at a still formidable $7.98 billion Friday, an increase of $1.68 billion from Thursday.
In addition, 29 new negotiated issues we're added to the calendar, totaling $2.75 billion. At the same time, the day-to-day listings swelled to 21 issues worth $2.49 billion.
Through July 22, all municipal bond and note sales totaled $191.91 billion. That averages out as $6.62 billion in weekly bond/note sales.
If the current pace continues, supply will break the $200 billion new-issue bond/note sale record within two weeks. In 1992's record year, that barrier was not broken until the week of Sept. 21-25.
This week's negotiated slate features $450 million Connecticut special assessment unemployment compensation advance refunding bonds, to be priced by Goldman, Sachs & Co.; $440 million North Carolina Eastern Municipal Power Agency revenue bonds, to be priced by Smith Barney, Harris Upham & Co.; and $153 million Kansas Turnpike Authority revenue refunding and improvement bonds, to be priced by B.C. Christopher.
The competitive calendar also contains some sizable deals, including $358 million Minnesota GOs; $254 million Fairfax County, Va., bonds; and $187 million Los Angeles GOs.
Traders said action was muted ahead of the weekend, but there were some customer lists out for the bid and situation trading up until the close.
In secondary dollar bond trading, prices were quoted down about to 3/8 point on average, but others were down only 1/8 or as much as one point.
In late trading, the WPPSS MBIA 5.60s of 2015 were quoted down 1/2 at 5.89% bid, 5.83% offered; Cook County, Ill., GO MBIA 5 3/8s were quoted down 3/8 at 5.89% bid, 5.85% offered; and New York LGAC 5 1/2s of 2018 were quoted down 1/8 at 5.89% bid, 5.87% offered. Salt River 5 1/4s of 2019 were quoted down at 5.79% bid, 5.77% offered.
In short-term note trading, yields rose three to as much as 15 basis points, traders said.
In late action, Iowa notes were quoted at 3% bid, 2.95% offered, and New York State notes were quoted at 2.60% bid, 2.55% offered.