Municipal prices wandered in a tight range yesterday as the market waited for today's employment report and the holiday weekend.
The session opened with a yawn, even though the Labor Department reported initial state unemployment insurance claims increased 3,000, to a seasonally adjusted 386,000, in the week ended Aug. 22, and nonfarm productivity increased at a revised 2.0% annual rate in the second quarter.
Both reports went practically unnoticed as the market focused attention on today's employment data.
The August employment report will show a 175,000 rise in nonfarm payrolls, but 100,000 of the new positions will be temporary summer jobs for teenagers, according to 23 economists surveyed by The Bond Buyer.
That compares to July's 198,000 gain in payrolls, which included 75,000 summer youth jobs.
Estimates of the jobs created last month ranged from a decline of 27,000 to an increase of 250,000, and estimates of the number of summer jobs for teenagers ranged from 40,000 to 170,000.
In July, the unemployment rate stood at 7.7%. Most of the economists expected the rate to decline to 7.6% or 7.5%.
Market players speculated that a jobs number that proves to be bad for bond prices could spell trouble, especially since many bond deals are waiting in the wings.
"If the government market goes down significantly, the bid will disappear and we could lose another five to 10 basis points easy," a trader said yesterday.
But most market players were hoping for a friendly number and a holiday break before coming in and tackling next week's new-issue calendar.
"The technicals are better for the moment, and if the number is a good one we should be ready to handle some more supply," a trader said. "It has crept up about one point from the lows this week, and out of the way safely we should be okay."
The Bond Buyer calculated 30-day visible supply at $5.24 billion and The Blue List of dealer inventory fell $99.7 million, to $1.26 billion.
New issuance was light yesterday, except for a large offering in the short-term note sector.
A syndicate including Lehman Brothers as senior manager priced and repriced $3.3 billion of California interim notes.
The notes, due Oct. 8, 1992, are unrated, and Lehman reported enough investor demand to lower, the reoffering yield 10 basis points, to 3.40% from 3.50%.
Note traders said most of the attention yesterday was on the California sale, and one market source said the deal was heavily oversubscribed.
"There were about $7 billion in orders for the notes," the market player said. "The real interest in the deal looks to be from the money funds who will own as many of the notes as possible and then, after the notes mature, roll them into regular portfolios."
In late secondary action, Los Angeles tax and revenue anticipation notes were quoted at 3.18% bid, 3.17% offered; New York City tax anticipation notes were quoted at 3.05% bid, 3.03% offered, and New York State Trans were quoted at 3.10% bid, 3.07% offered. Texas Trans were quoted at 3.14% bid, 3.12% offered, and Wisconsin notes were quoted at 3.20% bid, 3.19% offered.
In the long-term secondary action, traders reported some small blocks of bonds changing hands, but bid-wanted activity was scarce.
In the debt futures market, the December municipal contract settled down 5/32 to 96.21.
Dollar bond prices were mostly unchanged, but some bonds managed small gains on the day.
In late trading, Chicago general obligation AMBAC 5 7/8s of 2022 were quoted at 94 3/8-1/2 to yield 6.29%, Puerto Rico GO 6s of 2014 were quoted at 96 3/8-5/8 to yield 6.30%, and Florida Board of Education 6s of 2022 were quoted at 97 1/4-3/4 to yield 6.20%. Los Angeles Department of Water and Power 6s of 2032 were quoted at 96 1/4-3/8 to yield 6.25% and New York City Water Authority 6s of 2017 were quoted at 94 1/2-3/4 to yield 6.44%.