Municipal prices inched up 1/8 to 1/4 point in light trading yesterday in sympathy with the Treasury market as traders look for good inflation news from today's producer price index report.
Early yesterday, prices declined after initial state unemployment insurance claims decreased 35,000 to a seasonally adjusted 388,000 in the week ended June 29. The number of people receiving state unemployment benefits fell 119,000, to 3.412 million in the week ended June 22.
Traders said prices balked only momentarily after the number was released, as superior technicals in the tax-exempt market pushed prices higher.
"We're seeing a lot of demand because the market's got such good technicals," said one New York trader. "That's going to change later, but right now the market is thin and there are too many buyers chasing too few bonds, so we were able to put that number aside."
Comments from Federal Board Chairman Alan Greenspan that the credit crunch is still a problem also supported the higher levels.
The September municipal futures contract settled up 14/32, to 91.16 with the September MOB spread calculated at negative 59.
Adding to confidence, the market is expecting today's producer price index to reveal a small increase or remain unchanged, giving the market a positive inflation picture.
The June producer price index should show that inflation is under control and consumer spending is picking up, accoridng to 13 economists surveyed by The Bond Buyer.
The analysts on average expect a 0.1% decline in the index and a 0.1% gain in June prices excluding food and energy. In May, the wholesale price index was up 0.6% and prices excluding food and energy were up 0.4%.
The June retail sales report, which also will be released tomorrow, should show a 0.7% rise, following the 1.0% May gain. But analysts said most of June's strength will likely come in autos; excluding cars, sales should be up only 0.2%, compared with the 0.9% May increase.
In light new-issue activity in the negotiated sector yesterday, William E. Simon & Sons Municipal Securities as senior manager tentatively priced $70.5 million of Sabine River Authority, Texas, Water Supply Facilities revenue refunding bonds for the Lake Fork Project.
The offering included serials tentatively priced to yield from 4.25% in 1991 to 6.75% in 2003.
The bonds are rated AA by Standard & Poor's Corp. They are not rated by Moody's Investors Service.
Dillon, Read & Co. as senior manager tentatively priced and then repriced $39 million of New York State Dormitory Authority revenue bonds for Rockefeller University to lower most yields by five basis points from the refunded bonds.
A 2021 term, containing $25 million of the loan, was not formally reoffered to investors. The bonds are rated triple-A by both Moody's and Standard & Poor's.
Meanwhile, secondary trading was light, but traders reported some business around a bid-wanted list in the $40 million to $50 million range.
In follow-through business, Merrill Lynch & Co., senior manager for $100 million of Maryland general obligation state and local facilities bonds, reported an unsold balance of $22 million earlier today.
In secondary dollar bond trading, Florida State Board of Education 7 1/4 of 2023 were quoted up 1/4 point to 102 1/4-1/2 to yield 6.95% to the 2004 par call.
New Jersey Turnpike Authority bonds were up 1/8 on the day to 102 5/8-7/8 to yield 7.01% to the par call in 1999. The bonds still hold almost a 1 point lead on other names because of the announced refunding of all Turnpike Authority debt.
Triborough Bridge and Tunnel Authority 7s of 2020 were up 1/4 to 98 1/8-1/4 to lower the yield to 7.14%, while South Carolina Public Service Authority 7.10s of 2021 were up 1/8 to 99 3/8-1/2 to yield 7.14%.
Short-term note yields rose again yesterday as supply continues to weaken prices. Yields were up five basis points on average. Traders noted that supply pressure is ebbing after several weeks of heavy new issuance.
In secondary trading near the end of cash, March New York State Trans were quoted at 5.40% bid, 5.35% offered, while Los Angeles County, Calif., notes were quoted at 4.93% bid, 4.85% offered. New Jersey notes were quoted bid at 4.86%, 4.80% offered and Wisconsin notes were quoted 5% bid, 4.95% offered.
Merrill Lynch & Co. freed $175 million of Philadelphia School District tax and revenue anticipation notes from syndicate restrictions. Traders quoted no secondary market on the bonds as most went to permanent investors.
Prerefunded bond yields were mostly unchanged on the day, Prerefunded bonds with national names, callable in 1995, were quoted at the end of cash at 5.91% bid, 5.85% offered.