Prices rose modestly yesterday as fears about a Clinton presidency subsided, and the market instead focused on signs that augur lower yields.
Market players, who sold bonds during previous sessions on fears of a Clinton presidency, covered short positions and bought bonds yesterday.
Traders said market psychology changed as fears of a major fiscal stimulus package from a possible Clinton White House were replaced by the renewed realization the economy will likely remain weak and any tax increases under a Clinton administration would likely be a boon to the tax-exempt arena,
"We beat up the market too much on fears of a Clinton victory and it's bouncing back a bit," a trader said. "Everything that was bad about Clinton has been explained away, and people are reminding themselves about the weakness in the economy."
Political concerns aside, traders noted that with easing supply the market has regained a healthy technical position.
"Today's improvement was more technical than anything," one trader argued. "Suddenly the market is thin again, and things feel like they're in line."
By session's end, traders quoted dollar bonds unchanged to up 1/4 to as much as 1/2 point.
The biggest gains were made in the futures market, where the December municipal contract settled Up 20/32, to 94.07.
The December MOB spread narrowed to negative 271 from negative 285 Monday as municipals continued to outperform the government contract.
There was very little new-issue action yesterday, but market players reported better business flow, even though the election has subdued activity.
Reflecting greater investor demand, The Blue List declined for the third session in a row, falling $170 million, to $1.73 billion yesterday from $1.9 billion on Oct. 29.
In follow-through business, Bear, Stearns & Co., senior manager for $180 million Connecticut various-purpose bonds, reported an unsold balance of $22 million.
Prudential Securities, senior manager for $86 million Nassau County, N.Y., unlimited tax general improvement bonds, reported all bonds sold and the account closed.
But, despite the sudden ebb in supply, more bond deals are on the way.
Although the supply seems to be tapering off from the mammoth amount priced during previous months, The Bond Buyer yesterday calculated 30-day visible supply at $6.26 billion.
Once the election dust settles, the market will almost immediately be confronted by the next market-moving event - the release Friday of October employment data.
Traders reported several bid-wanted lists circulating in the Street and moderate selling and buying.
"The bid seems to have returned and we're getting some situations going again," a trader said. "It has a decidedly better tone and bonds are changing hands."
In secondary dollar bond trading, prices were quoted unchanged to up as much as 1/2 point.
In late action, New York City GO Series C 6 3/4s of 2018 were quoted at 7.06% bid, 7.01% offered; California GO 6s of 2015 were quoted at 6.57% bid, 6.54% offered; and New York City Water and Sewer 6 3/8s of 2022 were quoted at 94 1/4-3/4 to yield 6.829%.
Washington Public Power Supply System 6 1/2s of 2015 were quoted at 97 1/2-3/4 to yield 6.715%; Puerto Rico GO 6s of 2014 were quoted at 92 3/8-5/8 to yield 6.67%; and Denver Airport AMT 6 3/4s of 2022 were quoted at 93-1/4 to yield 7.33%.
In the short-term note sector, traders said yields rose about three basis points on average.
In late action, notes of Los Angeles, New Jersey, and Pennsylvania were quoted at 2.78% bid, 2.75% offered. Texas Trans were quoted at 2.80% bid, 2.75% offered.
LGAC to Tap Market
The New York Local Government Assistance Corp. yesterday announced that it plans to sell more than 300 million of bonds during the week of Dec. 14.
The negotiated sale will be the second during the 1993 fiscal year, which ends March 31. So far this fiscal year, the corporation sold one issue, a $389 million offering in September. A book runner has not been appointed yet, according to a spokeswoman for state Comptroller Edward V. Regan, a director on the board.
The corporation's board is expected to approve the sale and name a book runner later this month, the spokeswoman said.
To date, the corporation has issued six series of bonds totaling approximately $3.09 billion.