Prices surged higher yesterday, posting strong gains for the second day in a row, allowing underwriters to boost prices on $1 billion of new deals.
Municipals were quoted 3/8 to 5/8 point higher on average by session's end, fueled by strong demand for fewer bonds and by a good showing at the last leg of the Treasury's $60.6 billion auction.
Now that election worries have essentially ceased, improved market technicals have taken center stage for the short-term show, although more and more deals loom on the wings.
"People seem comfortable at these levels now that the doomsday scenarios of the election are behind us," one trader said. "There seems to be room to move higher in municipals."
In the debt futures market, the December municipal contract settled up 19/32, to 96.00. The December MOB spread widened to negative 239 from negative 231 Wednesday.
New issues were priced relatively cheap to secondary bonds yesterday, traders said. But both the primary and secondary sectors were firm, they added.
Goldman, Sachs & Co. as senior manager priced and repriced $150 million California Statewide Communities Development Authority lease revenue bonds for the Oakland convention centers project.
At the repricing, yields were lowered by five basis points on bonds due in 2014.
The final offering included serial bonds priced to yield from 4.15% in 1995 to 6.25% in 2007. A 2010 term was priced with a coupon of 6% to yield 6.30% and a 2014 term, containing $53 million of the loan, was priced with a coupon of 5.50% to yield 6.307%, an original issue discount.
The bonds are insured by the AMBAC Indemnity Corp. and are rated triple-A by Moody's Investors Service and Standard & Poor's Corp.
Lehman Brothers priced and repriced $136 million of state university and college system revenue bonds for West Virginia.
Serial bond yields were lowered by five basis points from 2002 through 2007, and 2012.
The final reoffering scale included revenue refunding bonds priced to yield from 3.75% in 1994 to yield 6.35%. A 2012 term was priced as 6s to yield 6.40%.
The bonds are AMBAC-insured and are rated triple-A by Moody's and Standard & Poor's.
Goldman Sachs also priced and repriced $118 million Tallahassee, Fla., electric refunding revenue bonds.
At the repricing, yields were lowered by five basis points on Series A serials from 1998 through 2004. Yields on Series B bonds were lowered by five basis points in 2004 and 2012.
The final reoffering scale included $76 million Series A refunding bonds priced to yield from 3.60% in 1994 to 6.15% in 2007. About $42 million Series B new money bonds were priced to yield from 5.90% in 2004 to 6.25% in 2009, and 6.30% for term bonds due 2012.
The bonds are rated Aa by Moody's and AA-minus by Standard & Poor's.
The Frazer Lanier Co. priced and repriced $99 million Mobile, Ala., general obligation refunding and capital improvement warrants.
At the repricing, yields were lowered by five to 10 basis points on the current interest warrants, while zero coupon bond yields were lowered by five basis points in 2002.
The offering included $57 million current interest warrants priced to yield from 2.90% in 1993 to 5.65% in 2001. There also was $43 million capital appreciation bonds priced to yield from 6.05% in 2002 to 6.75% in 2010. Bonds from 2011 through 2020 were not formally reoffered to investors.
The bonds are insured by the Municipal Bond Investors Assurance Corp. and triple-A rated by Moody's and Standard & Poor's.
A syndicate led by Goldman Sachs priced and repriced $80 million Georgia Housing and finance Authority home ownership opportunity program bonds.
Serial bond yields were lowered by five basis points, while term bond yields in 2010 were lowered by about 12 basis points.
The final reoffering included serials priced at par to yield from 2.95% in 1993 to 5.85% in 2003. A 2010 term was priced at par to yield 5.75%, a 2011 term was priced at par to yield 6.50%, and a 2023 term was priced at par to yield 6.60%.
The managers said they expected Moody's to rate the bonds Aa and Standard & Poor's to rate the issue AA-plus.
M.R. Beal & Co. as senior manager priced and repriced $74 million of New York State Medical Care Facilities Finance Agency long-term health care revenue bonds.
One source said the issue was oversubscribed and yields on bonds due in 2015 were lowered by five basis points.
The bonds were priced at par to yield from 4.50% in 1996 to 6.10% in 2005. A 2015 term was priced at par to yield 6.50%.
The issue is insured by Capital Guaranty Insurance Co. and is rated triple-A by Standard & Poor's.
In follow-through business, Donaldson, Lufkin & Jenrette Securities freed $238 million Piedmont Municipal Power Agency, S.C., electric revenue bonds from syndicate restrictions.
In late trading, the 6.30s of 2022 were quoted at 98 1/2-3/4 to yield 6.413% on the bid-side, where they were originally priced to yield 6.49%.
Indianapolis Bond Deal Sails
A syndicate led by Lazard, Freres & Co. priced and repriced $290 million Indianapolis Local Public Improvement Bond Bank bonds.
At the repricing, serial bond yields were lowered by five basis points from 2003 through 2007. Term bond yields in 2014 and 2022 were lowered by about four basis points, while yields on bonds due 2020 were lowered by about six basis points.
A Lazard underwriter said the issue saw broad institutional support, thanks mainly to ambitious pre-sale efforts. The deal was oversubscribed, even at the repricing.
"The biggest reason the deal went well is the tremendous work that was done to get the institutions to understand the purpose of the refunding and the status of the project," the officer said. "We had a lot of loyal buyers going in and we picked up some new ones."
The final reoffering included serials priced to yield from 5.90% in 2000 to 6.70% in 2007. A 2014 term, containing $69 million of the loan, was not formally reoffered to investors, a 2020 term, containing $125 million, was priced as 6 3/4s to yield 7.029%, and a 2022 term was priced as 6 1/2s to yield 7.112%. Bonds from 2000 through 2009 are non-callable.
The bulk of the proceeds from the issue will be used to refund about $208 million of bonds the city sold through the bond bank in 1988 to help finance a downtown retail mall that has yet to be built.
The bonds are secured by the city's moral obligation pledge and property tax revenues from a 150-square-block tax increment finance district that incorporates much of the city's downtown.
In a press release, Mayor Stephen Goldsmith attributed the "success" of the issue not only to the "expected future success" of the Circle Centre mall, "but also to Indianapolis' nationally recognized economic strength."
"People recognize the growth of Indianapolis and its commitment to maintain its credit rating and expand its economic base," said Jim Snyder, the city's director of strategic and financial planning and the executive director of the bond bank.
Indianapolis has a triple-A GO rating from Fitch Investors Service and Moody's Investors Service and an AA-plus rating with Standard & Poor's. The bond bank issue is rated A-plus by Standard & Poor's Corp. and AA by Fitch Investors Service and was not by Moody's.
Traders reported moderate activity in the secondary market, but large blocks of bonds were said to have changed hands.
In secondary dollar bond trading, prices were quoted unchanged to up 3/4 point, depending upon the bond, traders said.
In late action California Public Works 6.60s of 2022 were quoted at 99 1/4-1/2 to yield 6.65%; California GO 6 1/4s of 2019 were quoted at 6.44% bid, 6.42% offered; and New York City Water and Sewer 6 3/8s of 2022 were quoted at 97 3/8-1/2 to yield 6.577%.
Puerto Rico GO 6s of 2014 were quoted at 94 7/8-bid to yield 6.442%; Denver Airport Authority AMT 6 3/4s of 2022 were quoted at 95 1/8-3/8 to yield 7.14%; and Florida Board of Education of 6s of 2025 were quoted at 95 3/8-3/4 to yield 6.337%.
In the short-term note market, yields were mostly unchanged in light trading.
Near session's end, Los Angeles Trans were quoted at 2.82% bid, 2.80% offered.
Philadelphia Note Offering
Philadelphia will offer $100 million tax and revenue anticipation notes for sale today and market players expected a top yield of 3.30%.
A syndicate led by Mellon Bank will price the issue, the first note sale by the city since the collapse of a Philadelphia note sale in 1990.
The reverberations from difficulties suffered in 1990 still be felt and will translate into higher yields for today's deal, traders said.
"They had a lot of trouble last time and we don't expect they will fool around this time," said one trader. "They want it done so they're going to price it to fly."
Market sources said ambitious pre-sale efforts were underway, which one trader speculated could mean the deal will be received well at the 3.30% level.