Tax-exempts climbed heartily yesterday, thanks to an influx of investor cash and a stronger Treasury market.
Customers bid up for bonds for the third straight session, ending weeks of losses.
Market players speculated that buyers were eager to snap up bonds ahead of various January redemptions and coupon payments. They also speculated that demand was increasing as buyers, perhaps bearish on the long-term outlook for interest rates, took on municipals, which retain more value in a higher interest rate environment than taxable securities.
The buying spree began last week after dealers bid very aggressively for a $1.3 billion New Jersey note deal, reflecting an influx of bond fund cash on the short-end of the curve. The upward momentum began to move out on the curve yesterday as investors became more confident that dealers would follow their lead higher.
The Treasury market also lent tax-exempts a hand yesterday. Government traders said the market improved well over 1/2 point on the long end in anticipation of favorable producer and consumer price reports, due out Thursday and Friday.
Municipals opened up 1/4 and posted 3/8 to 1/2 point gains by noon eastern time. At the same time, the March municipal contract climbed 25/32 to 102.21. By session's end, cash bonds were quoted up 3/8 point on average, although some bonds rose more than one point, depending upon the name. High-grade bonds were said to rise 1/2 point.
In late secondary dollar bond trading, San Jose Redevelopment 5s of 2020 were quoted at 5.44% bid, 5.42% offered; Chicago O'Hare MBIA 5s of 2018 were quoted 5.61% bid, 5.58% offered; and Los Angeles Wastewater FGIC 5.20s of 2021 were 5.47% bid, 5.45% offered.
In the debt futures market, the March municipal contract settled up 1 7/32 to 103.03, just off the high of 103.04. The contract made a low mark of 102.07. The MOB spread widened to negative 420 from negative 418 on Friday.
New Deals
In the competitive sector, a Lehman Brothers group won $182 million King County, Wash., unlimited tax general obligation refunding bonds with a true interest cost of 4.8738%.
An unsold balance was unavailable late in the day.
Serial bonds were reoffered to investors at yields ranging from 3.10% in 1994 to 5.30% in 2016. A 2019 term was reoffered as 4 3/4s to yield 5.35%. The issue is rated Aa1 by Moody's and AA-plus by Standard & Poor's.
Lehman Brothers also won a separate King County deal. Bidding a TIC of 5.029%, the firm won $117 million limited tax various purpose GO refunding bonds. An unsold balance also was unavailable late in the day.
Serials were reoffered at yields ranging from 3.45% in 1996 to 5.30% in 2016. A 2019 term was reoffered as 4 3/4s to yield 5.35% and a 2024 term was reoffered as 4 1/2s to yield 5.35%. The bonds are rated Aa by Moody's and AA-plus by Standard & Poor's.
Topping the negotiated sector, Goldman, Sachs & Co. priced and $246 million of various bonds for the Harris County, Tex., Flood Control District.
At the repricing, serial bond yields were lowered by five basis points from 1998 through 2015.
The final reoffering included $110 million road refunding bonds priced to yield from 3.30% in 1995 to 5.40% in 2015. There was $37 million permanent improvement refunding bonds priced to yield from 3.30% in 1995 to 5.35% in 2012; and $90 million improvement and refunding bonds priced to yield from 2.65% in 1994 to 5.40% in 2015. The issue is rated Aa by Moody's and AA-plus by Standard & Poor's.
Elsewhere, Merrill Lynch & Co. priced and repriced $218 million Sacramento County Sanitation Districts Financing Authority revenue bonds.
At the repricing, serial bond yields were lowered by five basis points on average, while term bond yields were cut by eight basis points in 2010 and by 10 basis points in 2023. A 2016 maturity was added to the scale.
Serial bonds were finally priced to yield from 2.35% in 1994 to 5.15% in 2008. A 2010 term was priced as 5 1/8s to yield 5.25%; a 2013 term was priced as 5 1/8s to yield 5/325%; and a 2023 term, containing $78 million, was priced as 4 3/4s to yield 5.40%.
The bonds are rated double-A by Moody's and Standard & Poor's.
Bear, Stearns & Co. priced and repriced $141 million New York Battery Park City Authority junior revenue refunding bonds.
At the repricing serial bond yields were cut by five basis points in 1994, while term bond yields in 2023 were lowered by five basis points. Serial bonds were finally priced to yield from 2.75% in 1994 to 4.95% in 2001. A 2023 term was priced at par to yield 5.20%.
The bonds are rated single-A by both Moody's and Standard & Poor's.
