Municipals Flat Before Jobs Data; Retail Placement Continues Brisk

Tax-exempts ended the day flat to 1/8-point lower on the bid side as dealers and traders dug in their heels before tomorrow's September employment data.

Participants voiced considerable optimism for the market, despite the roughly month-long price increases. Among reasons for the continued bull run are the impressive placement of the last week's huge volume, and various economic perceptions.

In new-issues, Tuesday's $164.63 million Rhode Island general obligation issue seemed in danger of becoming "the issue" haunting the market, one trader said. "You know, where you think it's gone, and you turn around, and suddenly it's everywhere?"

But J.P. Morgan Securities succeeded in almost cleaning its plate. Yesterday morning the account had an unsold balance of about $47 million; by the afternoon, only $14 million was left.

On the broader economy, M-2 shrank better than expected and an easing of monetary policy appears all but given.

"Municipalities keep selling deals, they keep getting priced aggressively, and they get done," said one trader. "Even if tomorrow's numbers are really ugly, I don't think it will succeed in changing the direction of this market. We will continue to roll along."

In general, cash levels in the market continue at extraordinary levels. Adding to the much-reported maturation of certificates of deposit, another trader noted that Oct. 1 coupons are also boosting the money available for tax-exempt investment.

"The coupons clipped [on Oct. 1] are waiting out there. They have to reinvest it, and this just keeps the market moving," he said. "There's money out there, the problem is getting people to work reinvesting it."

In the negotiated new-issue market, Lehman Brothers priced two Saddleback Valley School District -- Orange County, Calif. -- issues with maximum yields of 7.75%. The unrated bonds total $20.32 million for two separate districts.

The issues' serials are priced identically, with a 5.7% coupon in 1993, going out to a 7.5% coupon in 2006. The bonds are callable in 1999 at a premium and again in 2001 at par.

In competitive bidding, Merrill Lynch & Co. won a $12.19 million Middle County Central School District -- Suffolk County, N.Y. -- Series B issue at a net interest cost of 6.3741%. AMBAC Indemnity Corp. insured the deal to give it two triple-As.

The noncallable issue was priced with a maximum yield of 6.5% in 2009, and serials were priced from 4.5% in 1992 out to 6.45% in 2008.

Two other Lehman Brothers deals were priced earlier in the week but only published yesterday. One was the $72.2 million Dallas-Fort Worth International Airport revenue bonds with a maximum yield of 6.882% in the Series A 2021 term. The series is subject to the AMT and callable in 2000.

The other Lehman Brothers deal was the $58 million Orange County, Fla., Health Facilities Authority revenue issue in a Series A serials, select auction variable-rates, and residual interest bonds.

The serials were priced to yield from 5.35% in 1996 to 5.90% in 2000. The SAVRs were a $26.35 million 2021 term with a 2001 call that were not reoffered. And the RIBs followed the SAVRs in structure. The entire deal is insured by MBIA.

Dollar bonds were 1/8 weaker. New Jersey Turnpike Authority 6.90s of 2014 were flat quoted at 99 3/4-100 to yield 6.89%, while Triborough Bridge and Tunnel Authority 6 5/8s of 2017 also were unchanged at 99-99 1/4 to yield 6.68%. New York LGAC 7s of 2021 were quoted at 99 3/8-5/8 to yield 7.03%. And the bid side for East Bay California 6 1/2s of 2016 were firmer at 98 5/8, locked, to yield 6.61%.

In other news, New York City officials are eyeing Oct. 9 for the negotiated sale of $1.25 billion of revenue anticipation notes. PaineWebber Inc. will be senior manager and bookrunner.

The short-term market scored small gains. In late trading, Los Angeles notes were quoted at least five basis points lower in yield, at 4.28% bid, 4.25% offered. March New York State Trans were quoted at 5.02% bid, 5.00% offered. Pennsylvania paper weakened a little to 4.40% bid, 4.37% offered. And Texas notes were quoted at 4.31% bid, 4.27% offered in late cash trading.

Yesterday's debt futures trading settled lower, with the December municipal contract closing don one tick at 94.19. The MOB spread narrowed a bit to negative 165.

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