Municipal market players kicked off the long holiday weekend on an upbeat and bullish note on Thursday with prices moving slightly higher.
Most of the limited action took place within the first two hours of trading on Thursday. Traders said prices gained as much as 1/8 point in some spots.
"There were a few small blocks trading in the morning," said a trader. "But after around 11:00, not much was done."
Market participants cited light forward municipal supply and an expected massive Jan. 1 infusion of cash as two of the main reasons for the strength in the tax-exempt market.
As a sign of the light supply, 30-day visible supply, as charted by The Bond Buyer, although up $94 million, stood at only $2.99 billion. Standard & Poor's Corp.'s The Blue List was down $106 million, to $1.75 billion.
Total long-term bond sales last week were $352 million, the lowest weekly volume since the first week of 1992, when the total was $228 million.
Traders were put in a festive holiday mood on Christmas Eve morning when initial claims for unemployment benefits rose 12,000 for the week ending Dec. 12 to a seasonally adjusted average of 360,000.
This was the highest weekly report on claims since the week ending Nov. 21.
"On a normal day, the number really wouldn't have meant that much," said a trader. "But [Thursday] it was just enough to give the market a positive push."
Municipal analysts and players alike, unburdened by trading on Thursday, spent some time looking ahead to 1993. And they are cheered with what they see.
"Aside from the normal cash that comes into the market at the beginning of the year, we are going to be treated to a massive call of bonds," said James Lebenthal, president of Lebenthal & Co., a New York-based retail investment firm. "January has the promise of being a very strong month."
Lebenthal said one of the common concerns about the redemption of bonds sold in 1983, now reaching their first call date, is the loss of double-digit yield.
However, the increase of mutual funds, providing automatic reinvestment and the compounding of dividends, is one instrument Lebenthal said can help investors move to those being sold today at about 6% from bonds yielding around 12%.
"It's a much better solution than moving to lesser-quality bonds for yield," Lebenthal said. "I think we'll see an increase in these funds as opposed to investors slumming for higher yield."
Lebenthal also said that lessened concerns about the economic stimulus package expected to be submitted by President-elect Bill Clinton, has given investors confidence in the municipal-market.
"The market was very concerned that an economic package from the new administration would drastically increase the deficit just to create empty, temporary jobs." he said. "It doesn't appear that will be the case."
"This stimulus appears to include added incentive to invest," Lebenthal explained.
The bullish tone of the municipal market does not look as if it will be tested by supply for the next couple of weeks.
The largest negotiated deal on the schedule is an issue of $150 million Wisconsin general obligation bonds to be sold by a group led by Morgan Stanley & Co.
The competitive sector carries several larger issues. But those deals are not scheduled to be priced until after the New Year.
An issue of $200 million Los Angeles Department of Water and Power revenue bonds is scheduled to be sold Jan. 5; $100 million Virginia Go bonds is slated for sale Jan. 6; and an issue of $210 million of San Jose Finance Authority revenue bonds is scheduled for Jan. 12.
In the short-term sector, $375 million Pennsylvania tax anticipation notes are scheduled to be sold on Jan. 6.
In secondary dollar bond trading, prices were mostly unchanged in very quiet action.
New York State Dormitory Authority 6s of 2022 were quoted at 93 3/8-3/4 to yield 6.50%; New Jersey 6s of 2011 were quoted at 99 5/8-7/8 to yield 6.03%; and Triborough Bridge and Tunnel Authority 61/8s of 2021 were quoted at 99 1/8-3/8 to yield 6.19%.
Metropolitan Pier and Exposition Authority 6 1/2s of 2027 were quoted at 99 1/2-3/4 to yield 6.53%; Massachusetts Bay Transportation Authority 6.20s of 2016 were quoted at 99 1/4-1/2 to yield 6.26%; and Georgia MEAG FGIC 6 1/8s of 2014 were quoted at 99 1/4 to yield 6.21%.
North Carolina Catawba FSA 6.20s of 2018 were quoted at 98 7/8-99 1/4 to yield 6.28%.
In short-term note trading, yields were also mostly unchanged during the abbreviated session.