While Treasury prices jumped one point yesterday and a bullish tone allowed municipal underwriters to lower yields on new issues, supply prevented secondary prices from making significant gains.
After a quiet holiday Monday, the government market opened with a roar and rallied during the entire session yesterday. But municipal traders put prices unchanged to up only 1/4 point in spots as the market continued to lag thanks to 30-day supply levels that are hovering at the $5 billion mark.
"The tone is great, and so are the fundamentals," a trader said late in the session. "But there are so many bonds being priced, it's very difficult to get people's attention in the secondary."
The markets remained firm going into the close in hopes of good news from today's inflation data, and traders reported good investor demand.
The October producer price index is predictred to show a modest 0.1% gain, according to 16 economists surveyed by The Bond Buyer.
In new-issue action in the negotiated sector, Goldman, Sachs & Co. as senior manager tentatively priced and repriced $424 million of Metropolitan Transportation Authority Transit and Commuter Facilities 1987 service contract bonds.
A source within the syndicate said the long end of the loan was done on a priority basis.
Yields were lowered by five basis points in the 1992-2001 maturities, while the 2011 and 2015 maturities were eliminated.
The final pricing included $272 million Series 5 Transit Facilities bonds and $147 million Commuter Facilities bonds, both of which are priced to yield from 4.55% in 1992 to 7% in 2006.
A 2012 term is priced as 7s to yield 7.125%, a 2016 term is priced as 6 1/2 to yield 7.07%, and a 2018 term is priced as 6s to yield 7.023%.
The bonds are rated A by Moody's Investors Service and BBB-plus by Standard & Poor's Corp.
In other negotiated action, Merrill Lynch & Co. tentatively priced $154 million of Kentucky state property and building commission project No. 3 bonds.
Serial maturities are priced at par to yield from 4.60% in 1992 to 6.30% in 2003.
A 2007 term is priced as 6 5/8S to yield 6.67% and a 2011 term is priced as 5 3/4 to yield 6.65%.
The bonds are rated A by Moody's and Standard & Poor's and A-plus by Fitch Investors Service.
In secondary trading, market participants reported lower yields on most of the blocks of bonds that changed hands yesterday, including $5 million of Massachusetts 7s of 2010, which were bid right around the coupon.
Bid-wanted activity was light, but sources said there was a large list of California paper that got some strong numbers.
In the debt futures market, the December contract settled up 9/32 to 95.22 with the December MOB spread calculated at negative 169.
In secondary dollar bond trading, prices were unchanged to 1/4 point higher on some names.
Denver Airport 7 3/4 of 2021 were quoted at 93-94 to yield approximately 8.29%. North Carolina Eastern 6 1/2s of 2017 were quoted at 97 3/8-5/8 to yield 6.69%. Washington Public Power Supply System 6 7/8 of 2017 were quoted at 99 5/8-7/8 to yield 6.88%, and Massachusetts Water Resources Authority 6 1/2s of 2019 were quoted at 95 1/2-5/8 to yield 6.88%.
In short-term note trading, yields dropped five basis points depending on the name.
In late secondary trading, Los Angeles Trans were quoted at 4.08% bid, 4.00% offered; March New York State Trans were quoted at 4.93% bid, 4.85% offered; and New York City Rans were quoted at 4.85% bid, 4.80% offered. Texas notes were quoted at 4.02% bid, 3.95% offered in late cash trading.
Goldman priced a $57 million issue of Michigan State Hospital Finance Authority hospital revenue refunding bonds for the Sparrow Obligated Group.
Serial bonds are priced to yield from 4.35% in 1992 to 6.95% in 2001.
A 2003 term is priced to yield 6.30%, a 2007 term is priced to yield 6.60%, and a 2011 term is priced to yield 6.682%.
The issue is insured by Municipal Bond Investors Assurance Corp. and rated triple-A by both Moody's and Standard & Poor's.
The Robinson-Humphrey Co. priced $53 million of Winston-Salem, N.C., general obligation refunding bonds.
Serial bonds are priced to yield from 4.20% in 1992 to 6.20% in 2004.
The issue is rated Aa1 by Moody's and AAA by Standard & Poor's.
Also, a $52 million issue of Henry County, Va., Public Service Authority water and sewer refunding revenue bonds was priced by A.G. Edwards & Sons.
The offering included serials priced to yield from 4.30% in 1992 to 6.25% in 2005.
A 2011 term is priced to yield 6.522% and a 2019 term yields 6.564%.
The bonds are insured by Financial Guarantyt Insurance Co. and rated triple-A by both Moody's and Standard & Poor's.
New York City will price $1.2 billion of uninsured bonds next Tuesday in order to refund $1.2 billion of outstanding insured paper, city officials said yesterday.
J.P. Morgan Securities Inc., which devised the financing, will serve as bookrunner. The city has named Bears, Stearns & Co.; Merrill Lynch & Co.; Goldman Sachs & Co.; First Boston Corp.; Lehman Brothers; and Dillon Read & Co. as co-senior managers, and also will use the rest of the managers in its regular bond sydicate for the deal.
The refunding will defease bonds that have been insured either in the primary or secondary market or that have letters of credit.
The deal is designed to free up credit enhancement capacity and to reduce issuance costs on two city general obligation issues. In December, the city is tentatively planning to enhance with letters of credit or bond insurance $657 million of the $750 million of the fixed-rate and variable-rate GO bonds. In February, the city expects to insure $422 million of the $750 million of fixed-rate bonds slated for sale.
The city estimates the present value saving on next week's deal to be $118 million, net expenses, and will reap about $87 million for its fiscal 1992 budget, which began July 1.
To guarantee credit capacity on the two deals, city officials and credit enhancement providers yesterday signed letters of commitment for future enhancement totaling $1.63 billion over the next 12 months.
MBIA, AMBAC Indemnity Corp., and Financial Security Assurance are expected to commit to insuring between them a total of $1.06 billion of fixed-rate bonds with intermediate maturities; FGIC, with its corporate affiliate FGIC Securities Purchase Inc., is expected to commit to $300 million of enhancement on variable-rate bonds with longer maturities; and Fuji Bank, the Sumitomo Bank, the Industrial Bank of Japan, and Morgan Guaranty Trust Company of New York are expected to provide letter of credit enhancement on a total of roughly $278 million of variable-rate bonds with shorter maturities.