New issues attracted improved investor interest yesterday, players said, but the secondary was mixed as the market idled ahead of today's economic reports.
Underwriters reported mostly small balances on competitive deals, and they said they were able to raise prices on much of the negotiated product sold yesterday, indicating improved investor demand in the primary. But traders said that those same investors probably sold bonds in the secondary to enable them to snap up new bonds. They also said many accounts may be sitting on their cash, worried about what a pending passel of economic news will mean for interest rates.
The economic indicator calendar is highlighted by today's producer price report and tomorrow's consumer price report.
"Crossover buyers are very much in evidence here, but the flow of money into the funds has gone down," one player said. "They're also holding higher cash reserves because they're a little nervous right here."
The market opened with a waver and some dollar bond were quoted down 1/8 to 1/4 point. Traders reported a firm tone for bonds within 10 years, but selling was prevalent throughout the session. One big retail bond firm based in New York estimated bidwanteds at $150 million.
"We're seeing some house cleaning going on and there is a defensive mood in the Street," a trader said. "There are few interesting blocks of bonds around to get into and it feels like the market is tired and coming to the end of a cycle."
Reflecting the slightly better tone in the secondary, The Blue List declined about $63 million yesterday, to $1.64 billion. That was the sixth consecutive fall, driving the list to its lowest level since the $1.5 billion of Sept. 20.
Trading was moderate during the morning, players said, but quieted down during the afternoon as the market settled in for the day. By session's end, prices were quoted mixed, with some bonds posting 1/8 point gains, others losing the same amount of ground, and the rest unchanged.
In secondary dollar bond trading, New York City Group C 5 3/8s of 2022 were quoted at 5.74% bid, 5.72% offered; Florida State Board of Education 5 1/4s of 2023 were at 99 5/8-100 to yield 5.27%; and South Carolina PSA FGIC 5s of 2025 were 5.28% bid, 5.27% offered.
In the debt futures market, the December municipal contract settled up 2/32 at 105.09, down from a session high of 105.15. The MOB spread narrowed to negative 483 from negative 491 on Tuesday.
A CS First Boston group was $171 million University of California refunding revenue bonds with a true interest cost of 5.13%.
Bank of America had the only other bid -- a TIC of 5.1502%.
First Boston reported an unsold balance of $10.7 million late in the day.
Serial bonds were reoffered to investors at yields ranging from 2.60% in 1994 to 5.15% in 2014. A 2016 term was reoffered with a 5% coupon for a return of 5.22%, while a 2021 term was reoffered as 4 3/4s to yield 5.18%.
The University of California bonds are insured by the Municipal Bond Investors Assurance Corp. and rated triple-A by Moody's Investors Service and Standard & Poor's Corp.
In other action yesterday, Baltimore County, Md., awarded $161 million consolidated public improvement and metropolitan district bonds to two firms.
A Goldman, Sachs & Co. group won $100 million with a TIC of 4.5826%. The firm reported an unsold balance of about $29 million late in the day.
Serial bonds were reoffered to investors at yields ranging from 3.05% in 1995 to 5% in 2013.
The issue is rated triple-A by Moody's and by Fitch Investors Service.
A Bear, Stearns & Co. group won the remaining $61 million with a TIC of 4.6598%.
The firm reported an unsold balance of $15.5 million late in the session.
The Baltimore County serial bonds were reoffered to investors at yields ranging from 2.60% in 1994 to 4.95% in 2011.
The issue is rated triple-A by Moody's and Fitch.
A Lehman Brothers group won $91 million Minnesota full faith and credit general obligation state refunding bonds with a TIC of 4.73%.
An unsold balance was unavailable late in the day.
Serial bonds were reoffered to investors at yields ranging from 3% in 1995 to 4.95% in 2011. Bonds from 2005 through 2007 were not formally reoffered to investors.
The bonds are rated Aa by Moody's and AA-plus Standard & Poor's, and triple-A by Fitch.
In the short-term note sector, Pennsylvania awarded $400 million tax anticipation notes, dated Oct. 21, due June 30, 1994, to four firms. The notes were reoffered to investors at 2.65% net.
Morgan Stanley & Co. and Merrill Lynch & Co. won $200 million with a bid of 3.25%; CS First Boston won $100 million with a 3.25% bid,; First Chicago Capital Markets took $50 million with a 3.25% bid; and Prudential Securities won the remaining $50 million with a 3.25% bid.
The notes are rated MIG-1 by Moody's, SP-1-plus by Standard & Poor's, and F1-plus by Fitch.
Smith Barney Shearson priced and repriced $214 million workers' compensation facilities bonds for the Ohio Building Authority.
At the repricing, serial bond yields were lowered by five basis points in 2008, while term bond yields in 2014 were lowered by seven basis points.
The issue marked the first in the state to be backed with funds from the Ohio Bureau of Workers' Compensation.
The bonds were priced at a true interest cost of 5.1% and a net interest cost of 5.11%, according to Paul Goggin, the authority's executive director. He said that the deal had been in the works for more than three years.
William Hand, a managing director at Smith Barney, said good response from investors allowed some prices to be raised. Hand said interest in the term bonds came from Ohio and other bond funds, as well as from insurance companies. Shorter maturities attracted interest from retail investors in Ohio, he said. The issue was exempt from both federal and state income taxes.
The $32 million of bonds maturing in 2009 and 2010 were sold up front to an insurance company, Hand said.
The final scale included serial bonds priced to yield from 3.25% in 1995 to 5.05% in 2008. A 2014 term, containing $63 million, was priced as 4 3/4s to yield 5.23%. Bonds in 2009 and 2010. totaling $32 million, were not formally reoffered.
The issue is rated A by Moody's and A-plus by Standard & Poor's. Standard & Poor's also affirmed its A-plus rating on Ohio's $18.12 billion of outstanding general obligation debt, and said that the outlook is "stable".
Merrill Lynch & Co. priced, repriced, and restructured $253 million water and sewerage revenue bonds for Atlanta, Ga.
At the repricing, the amount was reduced from $267 million. A noncallable 2011 maturity was added to the serial scale, while a 2015 term replaced a 2014 maturity and a 2018 term was added. Serial bond yields were lowered by five basis points from 1998 to 2010. Term bond yields in 2023 were lowered by about two basis points. The firm said it received the verbal award.
The final scale included serial bonds priced to yield from 3.20% in 1995 to 5% in 2011. A 2015 term, containing $41 million, was priced as 5s to yield 5.20%; a 2018 term, containing $36 million, was priced as 4 1/2s to yield 5.23%; and a 2023 term, containing $72 million, was priced as 4 3/4s to yield 5.26%.
The Atlanta bonds are rated Aa by Moody's and AA-minus by Standard & Poor's. Fitch rated the bonds A-plus.
Goldman Sachs priced $150 million Valdez, Alaska, marine terminal revenue bonds for the BP Pipelines Inc. project.
The offering was made up of a 2028 bullet maturity, priced at par to yield 5.50%. The bonds are rated A1 by Moody's and AA- minus by Standard & Poor's.
Cal. State PUBs Delayed
A negotiated sale of $165.5 million in California State Public Works Board lease revenue refunding bonds has been delayed to the first week of November.
The 1993 Series B refunding bonds for various California State University projects had been scheduled for sale next Wednesday by a Goldman Sachs syndicate.
Hal Geiogue, California's assistant state treasurer, said yesterday that a postponement was necessary "to clear out bonds in the secondary market."
"Rates are low, and the market is probably going to hold -- as best anybody can tell right now," Geiogue said.
Richard E. Kolman, vice president and manager of underwriting and syndication for Goldman Sachs, said, "In terms of timing, it fits better to go into the first week of November. There's been a lot of California paper [in the market]. There's no rush on this one."
Fitch rated the bonds A-plus and Standard & Poor's rated them A-minus. Moody's is reviewing the issue.