Wilting consumer confidence set the stage for an issuer rush yesterday, but few turned out for the show.
"It's pretty sparse for this level of rates," Mike Bassett, a vice president at Stone & McCarthy Research Associates, said.
Though new issues totaled slightly more than $1 billion, that figure was still low compared to the new-issue rush when rates were low last January, he said. Mr. Basset also noted that some of yesterday's issues were junk offerings that had had been scheduled for some time.
The yield on the 30-year Treasury bond fell to 7.42% yesterday, helped lower by the Consumer Confidence Index's big drop. The index fell to 61 in July from a revised 72.6 in June. A decline 69.5 had been expected.
Better-quality corporates kept pace with Treasuries, which gained a point in the long end, while spreads widened on some lesser quality high-grades.
John Lonski, senior economist at Moody's Investors Service, noted that the 16% drop in July consumer confidence is the biggest since last October's 17.6% plummet. He also cited some new-issue market lethargy.
"There has been somewhat of a lull over the past couple of days," he said, citing Friday, Monday, and yesterday as relatively quiet days for new issues.
"Both Mr. Lonski and Mr. Bassett suspect potential issuers could be waiting for rates to drop further.
Barring any news from the presidential election front that triggers inflation worries, the long bond's yield could hit 7.25% by mid-August, Mr. Lonski added. If this had not been an election year, the bond's current yield would likely be even lower, he said.
"I think it's conceivable that political risk has added roughly 40 basis points to the 30-year bond," Mr. Lonski said.
The economist said the lion's share of 1992 new corporate issues has been to refinance old debt, rather than to obtain new money. That refinancing list could be shrinking now.
"The list of prime refunding candidates in all likelihood is shrinking," he said.
Yesterday's Treasury market strength also boosted secondary market prices for high-yield bonds, which gained 1/2 point to a point.
Chrysler Corp., which reported strong second-quarter earnings, saw its bounds rise one to two points depending on the issue, traders said.
Pittsburgh National Bank issued $250 million of 3.65% senior bank notes due 1993. The noncallable notes were priced initially at 99.975 to yield 3.675% or 12.5 basis points over the year Treasury bill on a bond equivalent basis. Moody's rates the offering Aa3, while Standard & Poor's Corp. rates it A-plus. Merrill Lynch managed the offering.
Cleveland Electric issued $245 million of 7.625% first mortgage bonds due 2002. The noncallable bonds were priced at 99.80 to yield 7.654% or 100 basis points over comparable Treasuries. Moody's rates the offering Baa2, while Standard & Poor's rates it BBB-minus. Morgan Stanley & Co. lead managed the offering.
Lukens Inc. issued $150 million of senior notes due 2004. The noncallable notes were priced at 99.487 to yield 7.691% or 103 basis points over comparable Treasuries. Moody's rates the offering Baa2, while Standard & Poor's rates it BBB-plus. First Boston Corp. lead managed the offering.
Commercial Credit issued $150 million of 6.7% notes due 1999 at par. The noncallable notes were priced to yield 60 basis points over comparable Treasuries. Moody's rates the offering A2, while Standard & Poor's rates it A. Salomon Brothers Inc. lead managed the offering.
Rogers Cablesystems issued $100 million of 9.625% senior secured second priority notes due 2002 at par. Guaranteed by Rogers Cable Ltd. and Rogers Ottawa Ltd., the notes were priced to yield 300 basis points over 10-year Treasuries. Moody's rates the offering Ba1, while Standard & Poor's rates it BB-plus. Merrill Lynch lead managed the offering.
Continental Homes Holding issued $75 million of 12% senior notes due to 1999. Noncallable for five years, the bonds were priced at 98.85 to yield 12.25%. Moody's rates the offering B1, while Standard & Poor's rates it B. Kidder, Peabody & Co. managed the offering.
Moody's has confirmed the long-term debt ratings of Montreal-based