More than $2 billion in new issues, led by $400 million of Hawaii airport bonds, bogged down secondary prices when they inundated the municipal market yesterday.
Traders quoted secondary bond prices unchanged to down 1/4 point in spots, depending on the name, but levels were not tested because investors focused on the primary. Traders said, however, that a seller could face weaker bids, depending on the name.
In the debt futures market, the March contract settled down 2/23 to 93.26 and the March MOB spread widened to negative 180 from 169 Monday.
Meanwhile, new issues received a mixed response from investors as deals were priced at varied levels, market players said.
Goldman, Sachs & Co. priced and repriced the Hawaii Airport System revenue bonds, subject to the federal alternative minimum tax, with a maximum yield of 7.12% in 2018.
Yields were raised five basis points for serial bonds and two basis points in 2021.
Goldman officers were in meetings late yesterday and could not be reached for commitment.
The final pricing included serial bonds scaled from 5.40% in 1995 to 6.75% in 2005. A 2007 term was priced as 7s to yield 7.05%, a 2012 term was priced as 6.90s to yield 7.0269%, and the 2018 term, containing $128 million of the loan, was priced as 7s to yield 7.125%, and a 2021 term was priced as 6 3/4 S to yield 6.97%.
The bonds are insured by the Municipal Bond Investors Assurance Corp. and bear triple-A's from both Moody's Investors Service and Standard & Poor's, except for the 2007, 2012, and 2018 maturities, which are uninsured and carry A ratings from both agencies.
First Boston Corp. tentatively priced $300 million of New York State Power Authority general purpose bonds with a maximum yield of 6.805% in 2019.
Market sources said demand for the issue was strong and serial yields might be lowered. First Boston officials were in late meetings and could not be reached for comment.
The offering included serial bonds tentatively priced to yield from 4.50% in 1992 to 6.55% in 2007. A 2012 term was tentatively priced as 6 5/8 S to yield 6.705%, a 2019 term, containing $ 118 million of the loan, was tentatively priced as 6 1/2 S to yield 6.805%, and a 2020 term was tentatively priced as 5 1/2S to yield 6.692%.
First Boston said it expects to receive an Aa rating from Moody's and the issue is rated AA by Standard & Poor's.
In other action, Lazard Freres & Co. as senior manager priced and repriced $141 million of New Jersey Health Care Finance Authority bonds for the Hackensack Medical Center. Yields were lowered about two basis points throughout the loan.
The final scale included serial bonds priced to yield from 4.10% in 1992 to 6.30% in 2002. A 2006 term was priced to yield 6.65%, a 2011 term was priced to yield 6.729%, a 2017 term was priced to yield 6.759%, and a 2021 term was priced to yield 6.72%.
The bonds are insured by FGIC and carry triple-A's from Moody's, Standard & Poor's, and Fitch Investors Service.
Lazard received the award late in the session. The deal saw demand from both retail and institutions, according to a Lazard officer.
In competitive action, Prudential Securities won $148 million Missouri state building special obligation refunding bonds with a true interest cost of 6.238%.
Prudential estimated that there was an unsold balance of about $76 million late in the day.
The offering included serial bonds priced to yield from 4% in 1992 to 6.60% in 2012.
The issue is rated double-A by both Moody's and Standard & Poor's.
Chemical Securities won $121 million of Virginia Public Schools Authority school financing revenue refunding bonds with a TIC of 6.247%.
By session's end, Chemical reported an unsold balance of $28 million.
The offering included serials scaled from 4.40% in 1993 to 6.55% in 2009.
The bonds are rated double-A by Moody's, Standard & Poor's and Fitch.
An issue of $87 million of New York State Medical Facilities Finance Agency Mental Health Services Facilities improvement revenue bonds was also won by a Prudential Securities group with a net interest cost of 3.369%.
An unsold balance of approximately $20 million remained.
The offering included serial bonds priced at par to yield from 5.25% in 1993 to 7.10% in 2002. A 2018 term was priced to yield 7.40% in 2018.
The issue is rated A by Moody's and A-minus by Standard & Poor's.
Over the last week traders have reported steady business to permanent investors and the secondary has held in well, despite the deluge of supply.
Standard & Poor's Blue List of dealer inventory decreased to $1.65 billion yesterday, down $27.3 million from the previous session.
"We're absorbing a tremendous amount of supply and from all indications, quite well," a trader acknowledged.
But yesterday activity ground to a halt as investors turned their attention to new issues, which were priced at cheaper levels than many seasoned secondary bonds.
"We've been seeing some good activity, but people are leery about bidding until the big deals get out of the way," said a Chicago-based trader. "After that stuff is done you can pick it up cheap and dish it out."
Traders did report a bid-list out from a bond fund and swaps from new issues.
In secondary dollar bond trading, prices were narrowly mixed on the day.
Florida Board of Education 6 3/4 S of 2021 were quoted at 99 5/8-100 to yield 6.75% and New Jersey Turnpike Authority 6 1/2 S of 2016 were quoted at 97 1/4-3/8 to yield 6.71%. North Carolina Eastern Power 6 1/2 S of 2017 were quoted at 96 1/4-3/4 to yield 6.76%.
The short-term note sector once again outperformed the rest of the market as funds reinvest cash from turn-of-the-month coupon payments.
Yields fell as much as 20 basis points, the second major drop this week.
In late secondary trading, Los Angeles Trans were quoted at 3.70% bid, 3.60% offered. March New York State Trans were quoted at 5.08% bid, 5.03% offered. Texas notes were quoted at 3.75% bid, 3.65% offered in late cash trading. New York City Rans were quoted at 5.15% bid, 5.05% offered, while city Tans were quoted at 4.15% bid, 4.05% offered. June California notes were quoted at 3.70% bid, 3.60% offered.
Dean Witter Reynolds priced and repriced $120 million of Ohio general obligation infrastructure improvement bonds to lower yield by five to 10 basis point in 1992 to 2000.
The final pricing included serials priced to yield from 4.50% in 1993 to 6.40% in 2006. A 2011 term was priced as 6 1/2 S to yield 6.55%.
The bonds are rated double-A by both Moody's and Standard & Poor's.
Smith Barney, Harris Upham & Co. tentatively priced and repriced $85 million of Orange County, Calif., certificates of participation for the civic center expansion project. Yields were lowered two to 10 basis points in 1992 to 1996.
The final pricing included serial bonds priced to yield from 4.20% in 1992 to 6.60% in 2006. A maximum term bond of 2018 was priced to yield 6.771%.
The issue is AMBAC-insured and triple-A rated by both Moody's and Standard & Poor's.