Sellers gave the market no respite yesterday, traders said, as prices continued to cheapen.
The market adjusted lower for the eighth consecutive day because of what appear to be concrete improvements in the economy, traders said. Most recently, a big 20.8% jump in home sales on Tuesday pummeled prices the hardest. Although there were no significant economic reports released yesterday, the downward pressure on prices continued unabated, traders said. Sellers tossed bonds up for sale right at the opening yesterday. Traders termed the flow moderate, although one firm estimated that bid-wanteds totaled just over $400 million on Tuesday, compared to $200 million on an average day.
"The market tried to consolidate at the lower levels, but the secondary guys had their inventory repriced by cheaper new deals and we got no support from the government market," a trader said. "There's really no relief in sight."
Traders cited very little liquidity as players try to duck action ahead of tomorrow's important employment report. The Blue List of dealer inventory continued to reflect a heavy market tone. The list inched $9 million higher yesterday to $2.07 billion.
Tax-exempts opened mixed, but soon began to taper off, traders said. There was little to dominate the session, beside bid-wanted activity, traders said. By mid-session, prices the December municipal contract was quoted down 9/32 at 102.09 and the 30-year Treasury bond was down 15/32 to yield 6.09%.
As the day progressed, traders said that cheaper new issues and drops in the Dow Jones Utility Index - an interest rate sensitive measure - also contributed to downward pressure. Treasury prices came under additional fire after the refunding announcement revealed larger than expected numbers and the reopening of the 10-year note.
By session's end, long tax-exempt bonds were quoted down 1/2 point, but prices were scattered from down 1/8 to down one point. For example, bonds from this week's bid Los Angeles Department of Water and Power Authority deal were hit extra hard. Traders quoted the 5.40s of 2031 at 5.58% bid, less 7/8, less 5/8 point offered.
In the debt futures market, the December municipal contract bounced off a low of 102.06, settling down 6/32 to 102.11. The MOB spread widened to negative 456 from negative 452 on Tuesday.
In the short-term note market, traders said yields were up one to five basis points on the day. In late action, California Rans were quoted at 2.72% bid, 2.68% offered; New York City Tans were quoted 2.76% bid, 2.73% offered; and Pennsylvania Tans were 2.73% bid, 2.70% offered.
Topping action, a Bank of America group won $187 million University of California refunding revenue certificates of participation for the UCLA central chiller/cogeneration facility, bidding a true interest cost of 5.5745%.
Goldman, Sachs & Co. had the cover, bidding a TIC of 5.6399%.
An unsold balance was unavailable late in the day.
Serial bonds were reoffered to investors at yields ranging from 3.20% in 1995 out to 5.50% in 2011. A 2014 term was reoffered as 5 1/2s to yield 5.55%; and a 2017 term was reoffered as 5 1/2s to yield 5.60%. A 2020 term, containing $37 million of the loan, was reoffered as 5.60s to yield 5.65%; and a 2021 term was reoffered as 6s to yield 5.55%.
The issue is rated Aa by Moody's and A-plus by Fitch.
Heading up negotiated price action, Goldman Sachs priced, repriced and restructured $149 million Michigan State Hospital Finance Authority hospital revenue refunding bonds for the Sisters of Mercy Health Corp. obligated group.
At the repricing, yields were lowered by five basis points in 1994, while a 2008 maturity was added to the serial scale.
The final offering included serial bonds priced to yield from 2.95% in 1994 to 5.35% in 2008. A 2013 term, containing $29 million, was priced as 5 3/8s to yield 5.50%. A 2021 term, containing $30 million, was priced as 5 1/4s to yield 5.625%.
Bonds in 2006, 2007, and 2013 are non-callable.
The issue is rated single-A by Moody's and Fitch and A-minus by Standard & Poor's, except for maturities from 1997 through 2021. Those bonds are MBIA-insured and rated triple-A by Moody's, Standard & Poor's, and Fitch.
Smith Barney Shearson tentatively priced $113 million Lafayette Public Power Authority electric revenue refunding bonds.
The firm said it received the verbal award at the original price levels by mid-afternoon.
Serial bonds were priced to yield from 2.80% in 1994 out to 5.40% in 2010. A 2012 term, containing $19 million, was priced as 5 1/4s to yield 5.45%.
The bonds are AMBAC-insured and rated triple-A by both Moody's and Standard & Poor's.