Municipal bonds finished 1/4 point higher yesterday as participants downshifted ahead of the Memorial Day weekend.
"The marketis firm today," one trader said. Tax-exempt municipals remain in good technical shape with little secondary supply and not enough on the forward calendar to cause worry, he said.
"The more and more you look at it, there's not too many bonds around," another trader said.
A third trader cited the June municipal bond contract as helping lift the cash market.
"The muni bond contract got very rich so guys were selling that and buying cash," he said. He cited some "moderate" customer selling yesterday, with roughly $150 million out for the bid, mainly from mutual funds.
Yesterday's June MOB spread was negative 392, compared to negative 402 on Wednesday. In debt futures, the June Municipal contract finished up more than 1/4 point higher to 92 3/32s.
Dollar bonds had been up by 3/8 point until mid-afternoon when they retreated slightly to end 1/4 point higher on the day.
"I think that Treasuries came off a bit, and we're following the Treasury market without too much question," a municipal analyst said.
Yields on high-grade issues fell by two basis-points, mostly on lack of supply, he said. Activity was light.
Traders some morning trading gave way to afternoon quiet as participants were reluctant to take on positions ahead of the holiday weekend and risk an unfavorable shift market direction.
"If they buy something today, they'll probably end up holding onto it till Tuesday," he said.
"It's definitely dead," Thomas Daly, senior vice president and director of Legg Mason Wood Walker Inc. municipal bond department, said yesterday.
Daly cited "very selective" institutional buying yesterday. Institutional buyers, primarily state-specific funds, need to put cash to work and, with little supply ahead, are sifting through blocks of bonds as they come along.
"If they see something that fits the bill they're willing to do something," Daly said. However, "They're not knocking down the doors at this point."
Retail buying, which has been strong of late, tapered off yesterday Daly said. But he attributed that more to a slowdown by retail brokers ahead of the holiday weekend than to a slowdown in demand from retail customers. The increase in interest rates is apparently encouraging retail buyers in search of higher yields.
As for new issues, next week's negotiated calendar looks thin, with $150 million Maryland Health and Higher Education Facilities Authority revenue bonds through Alex. Brown & Sons, the only deal of any size.
On the competitive front, bidding is set for next Thursday for $100 million Port Authority of New York and New Jersey consolidated bonds. The authority also has a $100 million negotiated deal listed as day-to-day through Dillon, Read & Co. Port Authority Treasurer John E. Haupert said interest rates will determine when the Dillon Read deal arrives.
"We're just sitting here waiting for rates to hit our target," he said.
In other news, The Bond Buyer's 30-day visible supply fell $276 million yesterday, to $3.61 billion, the lowest level since March 3 when it was $3.15 billion. the measure of future supply has now been below $4 billion for six straight business days and under $5 billion for 10 consecutive days.
So far in 1994, the 30-day visible supply has been below $5 billion on 48 business days. In the same period in 1993, it had been under that mark on only 22 occasions. Supply was below $5 billion 78 times for the entire year.
The 30-day visible supply of municipal bonds for today totals $3,413.0 million, down $192.0 million from yesterday.
That comprises $1,529.8 million of competitive bonds, up $223.8 million from yesterday, and $1,883.2 million negotiateds, down $415.8 million from yesterday.
Standard & Poor's Blue List for yesterday declined $11.9 million to $1,611.8 million.
