Demand for tax-exempts pushed secondary prices up 1/8 to 1/4 point yesterday, while investors focused on a $183 million Metropolitan Transportation Authority offering in the primary sector.
The market continued to enjoy a firm tone as recent supply dries up, and trading remains relatively active ahead of the holiday. Some prices made gains of 1/2 point; in the debt futures market, the March contract settled up 13/32 to 95.08. The market managed to outperform the Treasury sector slightly and the March MOB spread narrowed to negative 184 from negative 187.
Investor demand for new issues was strong enough yesterday that senior manager Bear, Stearns & Co. lowered term bond yields by one to two basis points on the MTA deal.
Daniel L. Keating, senior managing director at Bear Sterns, said the deal saw across the board interest from bond funds, investment advisers, casualty companies, and dealers, which positioned bonds both for their own secondary use and retail demand.
The final scale included $64 million commuter facilities bonds and $120 million transit facilities bonds priced to yield from 5.85% in 1995 to 7.15% in 2004. A 2009 term yields 7.241%, a 2015 term yields 7.2% and a 2021 term yields 7.19%.
The bonds are rated A by Moody's Investors Servide and BBB-plus by Standard & Poor's.
The MTA bonds are the last of the state appropriation bonds for the 1986 through 1991 capital program. The last bond deal for the capital plan is slated for January.
The results of the deal erased trepidation that had spilled over from the previous MTA deal, which was tainted by New York State budget woes compounded by unrelated market conditions.
"Clearly there was some carryover feeling from the transaction one month ago," acknowledged Edward Armendariz, director of finance for the MTA. "We were able to improve all three terms, which is better than we expected. The underlying confusion is gone, and the buyers are comfortable with the credit again."
"The previous sale, we were dealing in a week when the stock market had fallen and there was a lot of supply in both the New York marekt and the general calendar," Mr. Keating added. "The budget situation was blown out of proportion and we had to bear the brunt of it."
Secondary traders reported a scattering of bid wanteds yesterday and trading was relatively active, although there were few large blocks that traded, they said.
In secondary dollar bond trading, Denver Airport 7 3/4 s of 2021 were quoted at 97 3/8-5/8 to yield 7.96%, Port Authority of New York and New Jersey 6 1/2s of 2021 were quoted at 96 3/4-97 to yield approximately 6.72%, and New Jersey Turnpike Authority 6 1/2s of 2016 were quoted at 99 1/4-1/2 to yield 6.54%. Pennsylvania Turnpike 6 1/2s of 2013 were quoted at 98 1/2-5/8 to yield 6.62%.
Yields fell about five basis points in the short-term note market, with California paper tading in the mid 30s.
In late secondary trading, California Rans were quoted at 3.40% bid, 3.35% offered, as were Los Angeles and Texas Trans. New York City Rans were quoted at 5.05% bid, 5% offered. New York State Trans were quoted at 4.75% bid, 4.70% offered.
Smith Barney, Harris Upham & Co. priced $52 million Wisconsin Health and Educational FAcilities Authority revenue bonds for Columbia Hospital.
The offering included serials priced to yield from 3.70% in 1992 to 6.65% in 2005. A 2010 term was priced to yield 6.766% and a 2021 term was priced to yield 6.80%.
The bonds are MBIA-insured and triple-A rated by Moody's and Standard & Poor's.
New York City
A syndicate led by Bear, Sterns is expected to price $985 million New York City general obligation bonds today, made up of $782 million fixed rate securities and roughly $200 million fixed-rate bonds.
Approximately $595 million of the fixed-rate portion will be backed by insurance, while the variable portion will carry letters of credit, according to city officials. Insured fixed rate bonds are expected to be tentatively priced to yield from 5.20% in 1995 to 6.82% in 2021. Uninsured bonds in 2008 are expected to yield 7.65%, while long term bonds of 2021 are exptected to yield 7.75%, sources said.
In secondary trading yesterday, market sources said $5 million New York City 7 3/4s of 2011 were rumored to have changed hands around 7.76%.
The bonds are exptected to be rated Baal by Moody's and A-minus by Standard & Poor's.