Queasiness about heavy forward supply combined with a sharply lower long bond drove down tax-exempt prices an average of 1 point yesterday.
At least one deal, a $700 million revenue bond offering, was pulled from the market because of souring conditions.
According to market sources, no sector of the municipal market was spared yesterday, including the over $1 billion in new deals that were almost uniformly repriced at higher levels.
Market participants shrugged off yesterday morning's economic news and municipal prices fell, with bonds trading in the secondary losing anywhere from 1/2 t 11/2 point.
Yesterday morning, the Commerce Department announced that retail sales fell 0.5% in August and the consumer price index rose a modest 0.3%.
But supply continues to be the biggest factor dragging down municipal prices. Yesterday, 30-day visible supply was measured at $8.13 billion, just off Monday's seven-year high of $8.15 billion.
That figure included $7.03 billion of negottated deals, the 1992 high.
Yesterday's issuance would have been higher, but First Boston Corp. chose to postpone its scheduled pricing of $700 million of Washington Public Power Supply System revenue refunding bonds.
According to Kevin C. Hennessey, a managing director at First Boston, shaky market conditions caused the large refunding to be put on hold.
"We are looking for the market to regain some stability." he said. "The instability overseas in the currency markets, combined with all this paper, has caused us to hold off on the pricing."
Mr. Hennessey was quick to point out that once the market regains some steam, the deal will be priced.
"There was a huge list of bonds yesterday morning," said a trading desk head. "There were 54 different blocks of bonds with over $186 million out for the bid. That helped bring prices down, as well."
Leading yesterday's charge into the roiled market was $490 million of Metropolitan Transit Authority revenue bonds priced and repriced in a deal senior managed by Dillon, Read & Co.
At the repricing, yields on the first portion of the loan were raised seven basis points on the term bonds, and a 2013 maturity of the term bond was added to the second part.
The offering was split into two sections, with the first part consisting of $445 million of transit facilities revenue bonds, Series K.
This portion of the loan was structured as serial bonds, priced to yield from 3% in 1993 to 6.527% in 2008.
There are also three term bonds. The first term matures in 2011, and was priced as 61/4s, to yield 6.62%.
The second term matures in 2014 and was priced as 65/8s, to yield approximately 6.65%. The third term matures in 2016 and was priced as 6s, to yield 6.55%.
The second portion of the loan contained $46 million of transit facilities revenue bonds, Series L.
This section contained two term bonds. The first term bond matures in 2013 and was priced as 51/2s, to yield about 6.596%.
The second term matures in 2014 and was priced as 65/8s, to yield 6.65%.
At repricing yields on the first portion of the loan were raised seven basis points in the term bonds, and the 2013 maturity of the term bond was added to the second part.
The entire offering was rated Baa by Moody's Investors Service and BBB-plus by Standard & Poor's Corp.
An issue of $167 million of Omaha Public Power District electric system revenue bonds was priced and repriced by a group led by Lehman Brothers.
The loan contained serials priced to yield from 3.50% in 1994 to 6.05% in 2008.
There were also two term bonds. The first term matures in 2012 and was priced as 6.15s, to yield approximately 6.20% and the second term matures in 2017 and is priced as 6.20s, to yield approximately 6.239%.
At the repricing, yields were raised by four basis points on both terms.
The offering was rated Aa by Moody's and AA by Standard & Poor's.
Merrill Lynch & Co. priced an issue of $139 million of Georgia Baptist Medical Center revenue bonds. The deal was split into three sections.
The first part was composed of $94 million Fulco Hospital revenue bonds. This portion contained serial bonds priced to yield from 3.15% in 1993 to 6.45% in 2007.
There are also two term bonds in the first part. The first matures in 2013 and was priced as 61/4s, to yield approximately 6.487%. The second term matures in 2022 and was priced as 63/8s, to yield 6.55%.
The second portion of the loan consisted of $42 million of Fulco Hospital Authority refunding revenue bonds. This section contained serial bonds priced to yield from 34.15% in 1993 to 6.45% in 2007.
This section also contained two term bonds. The first matures in 2013 and was priced as 61/4s, to yield approximately 6.487%. The second term matures in 2022 and was priced as 63/8s, to yield 6.55%.
The third portion of the loan was composed of $2 million of DeKalb Private Hospital Authority refunding revenue bonds.
This portion of the loan contained serial bonds priced to yield from 3.15% in 1993 to 6.45% in 2007.
This section of the loan also contained two term bonds. The first term matures in 2013 and was priced as 61/4s, to yield approximately 6.487%. The second term matures in 2022 and was priced as 63/8s, to yield 6.55%.
A group led by Morgan Stanley & Co. priced and repriced two separate issues of New York State Medical Care Facilities Finance Agency mental health services revenue improvement bonds.
The first part of the loan was an offering of $105 million revenue improvement bonds 1992 Series D bonds.
The loan was structured to include serial bonds priced to yield from 2.80% in 1993 to 5.90% in 2006.
The loan also included four term bonds. The first two terms, maturing in 2008 and 2009, were not formally reoffered to investors. The third term matures in 2013 and was priced as 6.10s, to yield 6.20%. The fourth term matures in 2022 and was priced as 57/8s, to yield 6.25%.
The offering is insured by AM-BAC Indemnity Corp. and AAA-rated.
The second offering, also senior managed by Morgan Stanley, was $23 million of 1992 Series E bonds.
This offering included serial bonds priced to yield from 3.00% in 1993 to 5.80% in 2003. This issue was also AMBAC-insured and AAA-rated.
The term bonds of each portion were repriced 10 basis points high.
The board of trustees of Massachusetts General Hospital, along with Goldman, Sachs & Co. as senior manager, have begun looking into consolidating $170 million in outstanding debt.
Edward Murphy, director of the Massachusetts Health and Education Facilities Authority, said the refunding would be handled through the authority.
"We're just getting started on this, " Mr. Murphy said. "I think we are probably looking at October for this refunding."
"There could be significant savings for the hospital if they consolidated their debt," said Benjamin S. Wolfe, vice president at Goldman Sachs. "There are still various issues that need to be reviewed, though."
In the secondary market, actively traded dollar bonds were anywhere from 1/2 point to 11/2 point lower.
"We got killed today," said a dollar-bond trader. "Right now we're just sticking it out in the bunker until the missiles pass over."