The government market flexed its muscles yesterday, lending some strength to municipals as prices climbed in moderate trading.
A generally positive tone throughout the government market bolstered traders, who broke through psychological resistance barriers in their push to a long bond yield of 7.25%.
The government 30-year bond made gains of 3/4 point to yield 7.33% by session's end in thin trading.
Bulls dominated tax-exempts as well and, although traders said action was moderate ahead of the holidays, dollar bond prices were quoted up 1/4 to 3/8 point and as much as 1/2 on some discount bonds. High-grade bond prices were unchanged but the tone was firm, traders said.
In the debt futures market, the March municipal contract settled up 7/32 to 97.05 in light trading.
"The government traders broke through some key resistance," a municipal trader said. "We saw that strength and got a last boost before it goes to sleep for the holidays."
New issuance was light, and, looking ahead, The Bond Buyer's 30-day visible supply totaled only $2.52 billion. The Blue List, meanwhile, fell $9.1 million, to $1.94 billion.
In negotiated new-issue action yesterday, Morgan Stanley & Co. priced and repriced $46 million of Farmington, N.M., pollution control revenue bonds for the Public Service Company of New Mexico's San Juan and Four Corners projects.
At the repricing, the reoffering yield was lowered by about three basis points.
The offering included a 2022 maturity priced at par to yield 6.375%.
The bonds are insured by AM-BAC Indemnity Corp. and are rated triple-A by Moody's Investors Service and Standard & Poor's Corp.
In follow-through business, Goldman, Sachs & Co., senior manager for $66 million of Alabama Housing Finance Authority single-family mortgage revenue bonds, reported an unsold balance of approximately $3.6 million.
Secondary trading was light, with most activity occurring in the New York and New Jersey dollar bond sections of the market, where supply is heavier than other sectors.
In secondary dollar bond trading, prices were quoted unchanged to up as much as 1/2 point spots.
New Jersey 6s of 2011 were quoted at 99 5/8-7/8 to yield 6.034%; New York State Dormitory Authority 6s of 2022 were quoted at 93 1/4-1/2 to yield 6.51%; and Triborough Bridge and Tunnel Authority 6 1/8s of 2021 were quoted at 99-3/8 to yield 6.20%.
Metropolitan Pier and Exposition 6 1/2s of 2027 were quoted at 99 5/8-3/4 to yield 6.52%; Massachusetts Bay Transportation Authority 6 1/2s of 2016 were quoted at 99-1/2 to yield 6.28%; and Georgia MEAG FGIC 6 1/8s of 2014 were quoted at 98 7/8-99 to yield 6.22%. Denver Airport AMT 6 3/4s of 2022 were quoted at 95 1/4-1/2 to yield 7.13%.
In the short-term note sector, yields were unchanged on the day.
In light new-issue action, A.G. Edwards & Sons as senior manager negotiated the purchase of $26 million of unlimited tax general obligation solid-waste system project notes for the Essex County, N.J., Utilities Authority.
The securities were priced at par to yield 3.70%, due Dec. 15, 1994. The issue is rated MIG-1 by Moody's.
In secondary trading, Los Angeles tax and revenue anticipation notes were quoted at 2.25% bid, 2.10% offered; New Jersey notes were quoted at 2.20% bid, 2.10% offered; and Pennsylvania notes were quoted at 2.20% bid, 2.10% offered. Texas Trans were quoted at 2.35% bid, 2.20% offered; and Wisconsin notes were quoted at 2.25% bid, 2.10% offered.