Market players retired from the field gracefully Friday after a week of price gains, but bond yields will be quickly tested this week by $7.3 billion of new deals.
Municipals surged last week, thanks mostly to improved technicals, and The Bond Buyer's weekly indexes dropped nine basis points and as much as 14 basis points.
Thanks to the strength of the market, new issues were generally well received throughout the week.
The tone continued to be firm on Friday, despite a jump in the consumer price index.
Market activity was light, as traders headed home for the weekend.
"The players don't have the stomach for swordplay today," a trader said Friday. "They're willing to take it easy and enjoy the progress the market has made because the specter of supply will be with us soon."
The Bond Buyer calculated 30-day visible supply at $8.12 billion Friday, up from $6.58 billion last Thursday.
The total includes 26 negotiated deals totaling $2.39 billion and 11 competitive issues totaling up to $572 million. All these offerings are on a day-to-day sales basis.
Secondary supply remains relatively light, traders said, reflected by The Blue List of dealer inventory, which fell $23.8 million, to $930 million Friday.
But there are several sizable deals slated for sale this week that could put pressure on prices if investors are picky or if a large number of issues flood the primary at the same time.
"You have to respect a calendar that big," a trader said. "There will have to be price concessions on the big deals, and if they pile a ton of deals on us at the same time, the market will fail."
The negotiated sector is dominated by $1.3 billion North Carolina Municipal Power Agency No. 1 Catawba electric revenue bonds, to be priced by Goldman, Sachs & Co.
In addition, a $250 million Texas Public Finance Authority general obligation refunding bonds is scheduled to be priced by Smith Barney, Harris Upham & Co.; and a $200 million Massachusetts general obligation bonds is slated to be priced by PaineWebber Inc.
The competitive sector features $400 million California general obligation bonds; $124 million Pennsylvania GOs; and $110 million New York State GOs.
The economic calendar is relatively light, but market players will be watching for the results of several indicators.
Industrial production and capacity utilization data for October will be released today, followed by October housing starts and building permits Friday.
The market got off to a shaky start Friday after the consumer price index rose 0.4% in October, seasonally adjusted, resulting in part from price gains in transportation, medical care and energy prices.
The core CPI, minus volatile food and energy prices, gained 0.5% in October.
Prices waffled at the report and bounced around in a tight range until later in the afternoon, when bonds stabilized.
Traders said the Street decided the number was an aberration because the index had been trending lower and the sudden pop seemed out of place.
In the debt futures market, the December municipal contract settled down 4/32, to 95.28.
In secondary dollar bond trading, prices were quoted down 1/4 in spots and up as much as 1/4 point in spots.
In late action, Piedmont Municipal Power Agency MBIA 6.30s of 2022 were quoted at 98-3/8 to yield 6.45%; California Public Works AMBAC 6.40s of 2016 were quoted at 99 3/4-100 to yield 6.42%; and California GO 6 1/4s of 2019 were quoted at 6.44% bid, 6.42% offered.
New York City Water and Sewer 6 3/8s of 2022 were quoted at 97 1/4-1/2 to yield 6.58%; Puerto Rico GO 6s of 2014 were quoted at 95-1/4 to yield 6.43%; and Florida Board of Education 6s of 2025 were quoted at 95 1/2-3/4 to yield 6.327%.
In the short-term note trading, yields were five to seven basis points lower on the day.
In late trading, notes of Los Angeles, New Jersey, Pennsylvania, and Texas were quoted at 2.79% bid, 2.75% offered.