Underwriters bid aggressively for competitive deals yesterday, but secondary prices drifted lower in preemployment report doldrums.
The weak tone that has characterized trading during the past month carried over into yesterday's session. With little news to give prices direction, traders reported another lackluster session. Prices were unchanged, or slipped 1/8 to 3/8 point as the market continued to slog its way toward tomorrow's employment report. The report will provide the best hope for a reading of the market's near-term prospects.
For example, in secondary dollar bond trading, Port Authority of New York and New Jersey 5 1/8s of 2021 were quoted unchanged late in the day at 98 3/8-1/2, to yield 5.23%; New York State Thruway 5 1/4s of 2013 were down 3/8 point at 5.59% bid, 5.56% offered; and California GO 4 1/4s of 2023 were off 1/8 at 91-1/4 to yield 5.35%.
Florida State Board of Education 5 1/4s of 2023 were quoted down 1/4 at 98 3/4-99 to yield 5.33%, and Florida Municipal Power AMBAC 4 1/2s of 2027 were unchanged at 5.25% bid, 5.23% offered.
Secondary supply continued to weigh on market psychology, traders said. The Blue List of dealer inventory fell $11.9 million yesterday, but remained at a sizable $2 billion.
In the debt futures market, the December municipal contract settled up 3/32 to 104.10, off a low of 104.00 and just below the high of 104.13. The MOB spread barely budged, narrowing to negative 479 from negative 480 on Tuesday.
Players idled through the morning session until competitive bidding for top-rated high-grade deals began around midday.
Underwriters took the bonds down at prices that were generally rich to the market. Negotiated deals, meanwhile, were priced cheaper, and underwriters had to lower priced to raise yields even more late in the day.
Some players speculated that aggressive bidding by the Street could mean that a rally is expected after Friday's employment report, while cheap negotiated deals reflect a cautious buy-side.
Other market participants noted the well-bid high-grade deals were more attractive to investors than lesser-rated negotiated deals, reflecting the desire for high-quality offerings.
In competitive action, Merrill Lynch & Co. won $284 million Maryland full faith and credit general obligation capital improvement and refunding bonds with a true interest cost of 4.4487%.
The First Boston Corp. had the cover bid with a TIC of 4.4640%.
The deal was priced right on yesterday's generic triple-A levels, traders said. Merrill reported an unsold balance of only $21 million late in the afternoon.
The offering was made up of serial bonds only, priced to yield from 2.60% in 1994 to 4.80% in 2008.
The issue is rated triple-a by Moody's Investors Service, Standard & Poor's Corp., and Fitch Investors Service.
In other action, North Carolina sold four issues totaling approximately $200 million. The bonds were reoffered to investors about five basis points through yesterday's generic triple-A scale.
Unsold balances were unavailable late yesterday.
In the North Carolina deals, Wheat, First Securities won $88 million Prison and Youth Services Facilities bonds with a TIC of 4.47%.
Serial bonds were reoffered at yields ranging from 2.50% in 1994 to 4.10% in 2001 and 4.55% in 2005. Bonds from 9002 through 2004 and from 2006 through 2008 were not formally reoffered.
J.P. Morgan Securities Inc. won $63 million non-callable public improvement refunding bonds with a TIC of 3.8905%.
Serial bonds were reoffered to yield from 2.40% in 1994 to 3.90% in 1999.
J.P. Morgan also won $30 million non-callable highway refunding bonds with a TIC of 3.3370%. Serial bonds were reoffered at 2.40% in 1994, 3% in 1995, and 3.25% in 1996.
Finally, J.P. Morgan also bought $16 million non-callable clean water refunding bonds with a TIC of 4.01485%.
Serial bonds were reoffered from a 2.40% in 1994 to 4.10% in 2001.
All four North Carolina issues are rated triple-A by Moody's, Standard & Poor's, and Fitch.
In light negotiated new issuance, Goldman, Sachs & Co. priced and repriced $216 million Minneapolis, Minn., and St. Paul Housing Redevelopment Authority health care system revenue bonds.
At the repricing, serial bond yields were raised by five basis points from 1996 through 1999. Goldman said it received the verbal award.
The final scale included serials priced to yield from 2.90% in 1994 to 5.10% in 2007. A 2013 term, containing $52 million, was priced as 5s to yield 5.30%. A 2018 term, containing $79 million, was priced as 4 3/4s to yield 5.32%.
The bonds are insured by the AMBAC Indemnity Corp. and rated triple-A by Moody's and Standard & Poor's.
In other action, Bear, Stearns & Co. priced and repriced $184 million New Jersey Housing and Mortgage Finance Agency home buyer revenue bonds.
At the repricing, yields on the Series G 2015 maturity and the Series H 2026 maturity were raised by five basis points.
The final offering included $130 million Series G bonds priced at par to yield from 3.30% in 1995 to 5.05% in 2007. A 2009 super sinker, containing $46 million of the loan, was priced at par to yield 3.75%. A 2015 super sinker was priced at par to yield 4.625%, while another 2015 term, containing $32 million, was priced at par to yield 5.35%.
There were also $55 million Series H bonds, subject to the federal alternative minimum tax, priced at par to yield 4.625% in 2018, while a 2026 term was priced at par to yield 5.50%.
The bonds are insured by MBIA, and rated triple-A by Moody's and Standard & Poor's.