Municipal bond movements exhibited little conviction yesterday, but secondary traders reported improved demand for a second consecutive session.
The credit markets opened with a yawn and gave a muted response to a jump in U.S. housing starts. Starts grew 2.7% in October to an annual rate of 1.396 million units, the Commerce Department reported.
Municipals began to heat up after the Treasury market moved slightly higher on hopes that the House of Representatives would pass the National Free Trade Agreement. Traders reported a better bid thoughout most of the session, adding that business flow improved for the second day. The slightly stronger investor demand encouraged many traders who have suffered severe losses in recent weeks. But gains were spotty and the overall market failed to make a real move in any direction.
"We didn't prove a thing," a trader said late in the day. "We're stuck in the middle of a trading range. Maybe NAFTA will give us a boost, but we'll be right back to facing a stronger economy."
By session's end, prices were quoted mixed, with most bonds unchanged, although some held onto 1/8 to 1/4 point gains, depending upon the name.
In secondary dollar bond trading, Chicago O'Hare MBIA 5s of 2018 were quoted at 5.60% bid, 5.55% offered; New York State Power 5 1/4s of 2018 were at 97-1/4 to yield 5.50%; and Pittsburgh Water and Sewer FGIC 4 3/4s of 2016 were 5.42% bid, 5.37% offered.
In the debt futures market, the December municipal contract settled unchanged at 102.06 after hitting a low of 102.04 and a high of 102.26. The MOB spread narrowed to negative 472 from negative 480 on Tuesday.
In new issue action in the competitive sector, $300 million New York and New Jersey Port Authority revenue consolidated bonds were won by Merrill Lynch & Co., bidding a true interest cost of 5.2027%.
Bear, Steams & Co. had the cover bid with a TIC 5.2573%.
Merrill reported an unsold balance of about $19 million late in the afternoon.
A Port Authority official estimated a present value savings of 30 million to $40 million from the sale.
Serial bonds were reoffered at yields ranging from 3.25% in 1995 to 4.85% in 2005 and 5.25% in 2012. Bonds from 2006 through 2011 and from 2013 through 2016 were not formally reoffered to investors.
The issue is rated Al by Moody's Investors Service, AA-minus by Standard & Poor's Corp., and AA by Fitch Investors Service.
In other action, a bidding group led by Morgan Stanley & Co. as senior manager won $152 million Virginia full faith and credit higher education institutions bonds and Article X refunding bonds, bidding a TIC of 4.7705%.
Goldman, Sachs & Co. had the next lowest bid, with a TIC of 4.7751%.
Morgan Stanley reported an unsold balance of about $1.5 million.
Serial bonds were reoffered at yields ranging from 2.60% in 1994 to 5.15% in 2013. A 2018 term was reoffered as 5s to yield 5.218% and a 2022 term was reoffered as 5 1/8s to yield 5.261%.
The bonds are rated triple-A by Moody's, Standard & Poor's, and Fitch.
In light negotiated pricing action, Smith Barney Shearson priced $145 million various bonds for the Detroit Metropolitan Wayne County Airport.
The offering included $14 million Series 1993A revenue refunding bonds, subject to the federal alternative minimum tax, priced to yield from 3% in 1994 to 5.50% in 2008, 5.65% in 2013 and 5.68% in 2016.
The Wayne County Airport also included $71 million of Series 1993B bonds, subject to the AMT, priced to yield from 3.90% in 1996 to 5.50% in 2008. A 2013 term was priced as 5 1/4s to yield 5.65%; a 2016 term was priced as 5.40s to yield 5.68%; and a 2021 term was priced as 5 1/2s to yield 5.75%. Finally, there was $59 million Series 1993C, non-AMT, bonds priced to yield from 2.80% in 1994 to 5.30% in 2008, 5.52% in 2013 and 5.62% in 2021.
The issue is MBIA-insured and rated triple-A by Moody's and Standard & Poor's."