Municipal prices ended mixed yesterday as the primary market had one of its busiest Mondays of the year.
Usually the bulk of the new deals are brought to market on Tuesday and Wednesday.
But the primary sector yesterday got off to a roaring start with almost $800 million in new debt priced, including several large deals. Several issuers brought their "mid-sized" deals to market early because they wanted to get out of the way of one of the largest bond issues of the year: The North Carolina Municipal Power Authority is planning a $1.29 billion revenue bond offering tomorrow.
This deal would represent the third largest bond issue of 1992, according to Securities Data Co. In February, the state of California sold $1.39 billion general obligation bonds. In October, the Golden State sold another $1.30 billion in bonds.
Most traders decided to play it safe and stay out of the market ahead of the massive North Carolina offering, said Glen R. Rauch, president of New York-based, Glen Rauch Securities.
Nevertheless, Rauch and other municipal market participants said they feel that the looming supply will be absorbed.
"There is a big dose of supply this week," Rauch said. "But, the recent press surrounding what a Clinton Presidency could mean to the municipal market has firmed up prices a bit."
The municipal market has been in a modest rally for the last two weeks helped by the conclusion of the presidential campaign, light forward supply, and mixed economic reports, he noted, saying these are factors currently helping the municipal market.
Rauch said reports of higher taxes on the horizon may spur investors to look at tax-exempt securities more positively.
Several market participants, including Rauch, said there is enough money out there to support this week's supply and the deal should perform well.
"When a big deal like this comes into the market, it generally is priced to move," said Thomas Moles, managing director of fixed income at J. & W. Seligman & Co. "This kind of pricing will then bring in the crossover buyers needed to make a deal of this size successful."
Moles said these crossover buyers - including insurance companies and pension funds - will be more interested in purchasing the bonds for the capital gains that can be realized in the secondary market then for long-term, fixed-income portfolio development.
Moles also said concerns about Clinton "meddling with the rules of the game" seem somewhat lessened by the belief that former Arkansas Rep. Beryl Anthony, a strong proponent of municipal finance, will remain involved in government at some level.
"There has been a good deal of money put into mutual funds during the last week." Rauch said. "That should help absorb some of this week's supply."
Municipal traders generally ignored yesterday's batch of economic data, which showed modest increases in industrial production and capacity utilization in October.
The Federal Reserve reported that production rose 0.3% in October and capacity utilization rose 0.1% to 78.5%
However, traders said the over-riding concern yesterday was forward supply.
"Everybody is just getting their house in order for the bulk of these new deals," a trader said. "There looks to be enough money to take care of this week's deals. Investors have been looking for bonds for the past week."
As of last Friday, there had been $199 billion in municipal long-term debt priced this year. That figure is only $8 billion short of the $207 billion all-time record, set in 1985.
Visible supply for the next 30 days, as measured yesterday by The Bond Buyer, rose $164 million, to $8.29 billion. The Blue List's tally of dealer supply was reported at $938 million, up about $8 million.
Forward supply for this week alone is expected to be more than $7 billion.
In the largest deal of the day, PaineWebber Inc. led a 27-member syndicate that priced of $200 million Massachusetts general obligation bonds.
The loan contained serial bonds priced to yield from 3.60% in 1993 to 6.05% in 2005.
There were also two term bonds. The first term matures in 2008 and was priced as 6s to yield 6.203%. The second term matures in 2012 and was priced as 5 3/4s to yield 635%.
The offering was rated A by both Moody's Investor's Service and Standard & Poor's Corp.
An issue of $115 million Platte River Power Authority power revenue bonds Series BB were priced and repriced by a group led by Smith Barney, Harris Upham & Co.
The loan contained serial bonds priced to yield from 2.75% in 1993 to 6.20% in 2007.
The deal also contained three term bonds. The first term matures in 2009 and was priced as 6 1/8s to yield 6.25%. The second term matures in 2014 and was priced as 61/8s to yield 6.28%. And the third term matures in 2018 and was priced as 5 1/2s to yield 6.33%.
At repricing, yields on the 2002-2007 serial bonds were lowered five basis points; a 2008 maturity was eliminated; the 2009 maturity was changed from the last serial bond to a term bond; and yields for the 2014 and 2018 term bonds were lowered by two basis points.
The offering is rated Aa by Moody's, A-plus by Standard & Poor's, and A-plus by Fitch.
An issue of $105 million Greater Orlando Aviation Authority was priced by a group led by PaineWebber Inc.
The offering was split into two pieces and both are AMBAC-insured and AAA-rated.
The first section contained $79.6 million airport facilities refunding bonds, Series 1992D.
This portion of the loan contained tax-exempt serial bonds priced to yield from 5.10% in 1999 to 6.00% in 2005. There was also a term bond maturing in 2008 that was priced at par to yield 6.25%.
The second portion of the loan is comprised of $25.8 million taxable airport facilities refunding revenue bonds Series 1992E.
That section of the loan contains bonds maturing in 1993 and 1995-1999.
The bonds were priced to yield from 38 to 66 basis points over the corresponding Treasury bond maturing in those years.
Traders reported a quiet day in the secondary market yesterday, with prices moving in a narrow range through most of the session.
Active dollar quotes were 1/8 point higher to 1/8 point lower in hushed trading.
In futures, the December municipal contract settled down 4/32, to 95.23. The MOB spread was measured at negative-246 yesterday, compared with minus-244 on Friday.
In late action, Piedmont Municipal Power Agency MBIA 6.30s of 2022 were quoted at 98 1/4-3/4 to yield 6.43%; California Public Works AMBAC 6.40s of 2016 were quoted at 99 3/4-100 to yield 6.42%; and California GO 6 1/4s of 2019 were quoted at 6.47% bid, 6.43% offered.
New York City Water and Sewer 6 3/8s of 2022 were quoted at 94 7/8-5 1/4 to to yield 6.58%; Puerto Rico GO 6s of 2014 were quoted at 94 7/8-5 1/4 to yield 6.44%; and Florida Board of Education 6s of 2025 were quoted at 95 1/2-3/4 to yield 6.32%.
In the short-term note trading, yields were mostly unchanged on the day.
In late trading, notes of Los Angeles, New Jersey, Pennsylvania, and Texas were quoted at 2.79% bid, 2.75% offered.
Expected to be priced in the short-term competitive sector today is an issue of $34 million of Jersey City bond anticipation notes through competitive sale.
Yesterday, Moody's rated the notes MIG-2, the lowest investment grade rating the agency can give to a tax-exempt note deal. The agency cited continuing fiscal problems and political instability.