Prices were mixed Friday, bu with the success of the sale of $1.8 billion New Jersey refunding bonds, market players were ready to break for the holidays with good cheer.
The New Jersey issue was the second largest deal sold - the New Jersey Turnpike's offering of $2 billion still holds first place - municipal market history and had the potential to depress prices.
But demand for the state GO issue on Thursday was strong, convincing many market players that municipals can look forward to lower yields in January, as demand increases even more from massive redemptions and annual payments Jan. 1.
Consoled by proof of easing technical pressure and increased demand Friday, market players were content to settle in for a quiet holiday week.
"You have to be impressed with the Jersey deal," said the head of a major Wall Street trading desk Friday. "Nobody is concerned about the Street float and now that supply is out of the way, you have to recognize demand is strong and the market seems like it is in great shape. "
Traders noted that prices may stay in, a tight range because issuers may flock to price deals at low rates.
But, after a year of record volume and a party change in Washington, the Street had a bright outlook on the months ahead.
"Clinton is saying all of the right things," a trader said. "The economy is moving at a slow pace. manageable for the market, and inflation is low. It all adds up to lower municipal yields."
Looking ahead to supply, The Bond Buyer's 30-day visible supply plummeted $2.52 billion, to $2.33 billion Friday, but The Blue List of dealer inventory rose $42.8 million, to $1.9 billion.
The 30-day visible supply is at its lowest level since June 25, when it was $2.25 billion.
The day-to-day negotiated component of 30-day visible supply shrank to just 11 issues totaling $1.21 billion. A month ago the list totaled $2.4 billion.
About $573 million of the day-today issues has been on the calendar for a significant amount of time.
For example, $55 million Louisiana Public Facilities Authority revenue bonds, to be priced by Lehman Brothers has been in the wings since July 24; $272.7 million Texas Municipal River Power Agency revenue refunding, to be priced by Merrill Lynch & Co. has been on the list since Aug. 17; and $245.3 million Austin, Tex., combined utility systems revenue refunding, to be priced by Morgan Stanley & Co., has been pending since Aug. 19.
The Blue List, up $310 million to $1.9 billion, compared with last Friday's $1.59 billion, reflects heavier dealer inventory. The total has not been as high since Oct. 23, when it was tallied at $1.93 billion.
Despite increasing secondary supply, market players said Friday demand should rise to meet the supply.
Demand is expected to increase soon after Jan. 1, thanks to redemptions and coupon payments.
According to The Bond Buyer's Redemption Report, a total of $10.12 billion will be paid off the first day of the new year: $7.36 billion of Pre-refunded bonds or bonds escrowed to maturity, come due: $2.1 billion of bonds with coupons of 7.5% or more will be called; and $664 million of bonds come due.
Looking even further ahead, on Feb. 1, a total of $2.62 billion will be paid off, including $1.4 billion of pre-refunded bonds or bonds escrowed to maturity and $442 million eligible to be called. Approximately $776 million of bonds come due.
On March 1, a total of $3.16 billion will be paid off, including $1.91 billion of pre-refunded and ETM bonds; $907 million is eligible to be called; and $341 million come due.
California bondholders are the most exposed to the redemption activity on March 1. The state and its local governments have a total of $406.32 million scheduled to mature or be refunded, according to the report.
Texas is a close second with $397.15 million, and Alabama places third with $354.88 million.
Texas, in addition to having the second-largest amount of bonds redeemed March 1, will be the leader in number of issues being paid off on Jan. 1, with 803, the report says. And the Lone Star state is on top in dollar volume for Feb. 1, with $290.94 million.
Minnesota portfolios will be the next most affected, with $137.65 million being paid off, and New York is third with $96.5 million, according to the report.
This Week's Market
Looking ahead to action this week, new issues will be scarce. Only $1.4 billion of bonds and notes will be priced this week.
Both the competitive and negotiated sectors are void of any sizable offerings.
The economic calendar holds few surprises as well. Tomorrow, the Commerce Department releases durable goods figures for November on Wednesday along with personal income and spending. Thursday, the Labor Department reports weekly initial jobless claims for the week ended Dec. 12.
Trading was lackluster Friday, and traders said bond prices were narrowly mixed on the day.
In the debt futures market, the March municipal contract settled up 4/32 to 96.19. The MOB spread widened to negative 246 from negative 245 Thursday.
In secondary dollar bond trading, prices were quoted mixed on the day.
In late action, New York State Research and Development Authority AMT 6 3/8s of 2027 were quoted at 97 3/4-98 to yield 6.54%; Triborough Bridge and Tunnel Authority 6 1/8s of 2021 were quoted at 99-1/8 to yield 6.20%; and Metropolitan Pier and Exposition Authority 6 1/2s of 2027 were quoted at 99 1/4-1/2 to yield 6.55%.
Massachusetts Bay Transportation Authority 6.20s of 2016 were quoted at 98-1/2-99 to yield 6.32%: Georgia MEAG FGIC 6 1/8s of 2014 were quoted at 98 1/8-1/2 to yield 6.28%; and North Carolina Catawba FSA 6.20s of 2018 were quoted at 98 3/8-5/8 to yield 6.32%. Denver Airport Authority AMT 6 3/4s of 2022 were quoted at 95 3/8-5/8 to yield 7.12%.
In short-term note trading, yields were unchanged to as much as seven basis points lower on the day.
Notes of Los Angeles, New Jersey, and Pennsylvania were quoted at 2.22% bid, 2.20% offered.