Municipal prices rose slightly in spots yesterday as the market continued to stabilize, but the tone was guarded and activity was light as participants settled in to wait for next week's economic indicators.
The Treasury market made 1/2-point gains after initial state unemployment insurance claims were reported to have increased by 29,000, to a seasonally adjusted 452,000, in the week ended Oct. 12.
Municipal traders reported an improved tone on the news, with some dollar bonds up 1/4 point, and the futures contract settled decidedly higher. But cash prices made only modest gains as the market struggled to regain solid footing after three harried sessions marked by price drops and heavy bid-wanted flow.
"It feels better, but the Street was disappointed by the limited follow through on the numbers," said a New York-based trader. "The jury is still out. It's been a hard week, and you can't say it's time to jump back on board yet. We should be in this range at least until we get the first of next week's economic data."
Market participants remained in a defensive stance but reported improved selling to permanent investors in certain situations. Market sources also reported good follow through on some of this week's new issues, which they said bodies well for the market's outlook.
In follow-through business, Goldman, Sachs & Co. as senior manager for $158 million of Missouri general obligation refunding bonds, reported an unsold balance of $47 million late in the session.
Goldman, senior manager for $120 million of Maryland general obligation bonds, reported an unsold balance of $8 million.
Goldman, also senior manager for $100 million of Los Angeles Department of Water and Power water works revenue bonds, reported an unsold balance of $12.5 million.
Lehman Brothers, senior manager for $124 million of New Hampshire Housing Finance Authority single-family residential mortgage bonds, reported an unsold balance of $10 million.
In other action, secondary-market trading was modest, with lighter bid-wanted flow than earlier in the week. Traders reported new large blocks of bonds changing hands, but an $8 million block of New York City 7s were said to have traded around 7.65%, less 1/4, and were rumored to have been reoffered at 7.60%, less 1/4.
In secondary dollar bond activity yesterday. North Carolina Eastern 6 1/2s of 2017 were quoted at 96-1/4 to yield 6.81% and the Municipal Electric Authority of Georgia 6.60s of 2018 were quoted at 98-1/2 to yield 6.72%. Denver Airport 7 3/4s, due 2021, were quoted at 93 7/8-94 to yield approximately 8.29%. New York City Water Authority 7s of 2015 were quoted at 98 5/8-3/4 to yield 7.10%, while Triborough Bridge and Tunnel Authority insured 6 5/8s were quoted at 98 5/8-3/4 to yield 6.72%.
In the debt futures market, the December municipal contract settled up 14/32 to 94.06. The December MOB spread widened to negative 134 from negative 130 the previous session.
Short-term note prices also improved in light trading and yields sank about five basis points on average, traders said.
In late secondary-market trading, Los Angeles Trans were quoted at 4.43% bid, 4.40% offered. Texas Trans were quoted at 4.40% bid, 4.35% offered and Pennsylvania Tans were quoted at 4.50% bid, 4.46% offered. New York City Rans were quoted at 5.15% bid, 5.10% offered. March New York State Trans were quoted at 5.15% bid, 5.10% offered.
In prerefunded bond trading, bonds callable in 1995 were quoted at 5.28% bid, 5.25% offered in late trading, while bonds callable in 1996 were quoted at 5.35% bid, 5.30% offered.
Wednesday, Morgan Stanley & Co. priced $98 million Michigan Strategic Pollution Control Bonds.
The offering was priced as 6 7/8s at par in 2021.
The issue is backed by the Financial Guaranty Insurance Co. and the bonds are rated triple-A by Moody's Investors Service, Standard & Poor's Corp., and Fitch Investors Service.