Prices Rise 1/4 On Jobs Data; N.Y.C. Note deal Bid Aggressively
Hopes for a Fed ease boosted municipal prices 1/4 to 3/8 point yesterday, while dealers bid aggressively for $1.4 billion of New York City short-term notes.
Initial state unemployment insurance claims increased 16,000, to a seasonally ajusted 422,000, in the week ended June 13, instead of declining slightly as the markets expected.
The news ignited renewed hopes for an ease in monetary policy, as early as today, according to some rumors, or as late as next week, when the next employment data will be reported.
Treasury traders pushed the 30-year bond up 5/8, to 7.77%, through the key resistance point of 7.80%.
Municipal prices were quoted up 1/4 to 3/8 point in spots, and traders said the tone was very firm as demand outweight supply. In the debt futures market, the September municipal contract settled up 17/32, to 96.02.
"The market is a very strong and people feel invincible," a trader acknowledged. "But this is usually when I tell my young traders the Icarus myth--get too close to the sun and you burn."
Nevertheless, the combination of hopes for a fed ease and the anticipation of increased investor demand from July 1 bond calls prompted dealers to snap up the New York City tax anticipation notes and revenue anticipation notes at aggressive prices.
Many dealers who bought the city notes did not formally reoffer the securities, betting that higher prices could be had if the short end of the market spiked higher on an ease or demand increased due to bond cells.
"A lot of dealers bought notes, speculating that prices would continue higher," a short-term trader acknowledged. "The yields were so low on winning bids in anticipation of July 1 what a lot of people con't want to talk about where their reoffering levels might be."
Late in the session, market sources said that dealer-to-dealer trading put the Tans offered at 2.45%, while Rans wre quoted at 2.85% bid, 2.80% offered late in the session.
Five firms won the $700 million Tans, due April 14, 1993. First Boston took $50 million with a bid of 3.25% and a net interest cost of 2.45595%, $50 million with a bid of 3.25%, and NIC of 2.55425%, and $175 million with a bid of 3.25% and a NIC of 2.59%.
Bear Stearns took down $50 million with a bid of 3.50% and an NIC of 2.517%, and $50 million with a bid of 3.50% and an NIC of 2.55531%.
Merrill Lynch & Co. took $100 million with a bid of 3.25%, an NIC of 2.4955%, and $75 million with a bid of 3.25% and an NIC of 2.5938%.
Morgan Stanley took $100 million with a bid of 3.25% and an NIC of 2.5487%. J. P. Morgan Securities took $50 million with a bid of 3.25% and an NIC of 2.5487%.
Four firms took down the $700 million 12-month Rans.
Goldman, Sachs & Co. took $200 million with a bid of 3.50%, and an NIC of 2.88%, another $200 million with a 3.50% and an NIC of 2.9045%, and $100 million with a bid of 3.50% and an NIC of 2.92545%.
Bear Stearns took $50 million with a bid of 3.50% and an NIC of 2.8564%.
J.P. Morgan took $50 million with a bid of 3.50% and an NIC of 2.869%.
Merrill Lynch took $100 million with a bid of 3.75% and an NIC of 2.9045%.
In other note action, Wisconsin awarded $450 million operating notes, due June 15, 1993, to two syndicates.
A Goldman, Sachs & Co. group took $440 million with a bid of 3.75%, a net interest cost of 2.8915%. The notes were reoffered to investors at 2.85% net.
A First Boston group won the remaining $10 million of the issue with a bid of 3.75% and an NIC of 2.874%. The notes were reoffered to investors at 2.80% net.
The issue is rated MIG-1 by Moody's and SP1-plus by Standard & Poor's.
Frank Hoadley, the state's capital finance director, said the state established the 3.75% coupon rate for the issue.
Firms that bid on the issue said the single-coupon rate would add value and liquidity to secondary market trading of the notes by eliminating confusion coused by having different coupon rates, he said.
Mr. Hoadley added that the note issue capitilized on the anticipated increase investor demand due to July 1 bond calls by closing the issue on that date.
In the long-term competitive sector, $403 million of Pennyslvania GO bonds, refunding and projects Series 1992 was won by a Lehman Brothers syndicate with a true interest cost of 5.8457%.
The firm reported an unsold balance of approximately $105 million late in the session.
The offering, which is non-callable, included $376 million current interest bonds priced to yield from 4% in 1994 to 6.25 in 2012. There were $28 million of capital appreciation bonds priced to yield from 6.25% in 2004 to 6.40% in 2008. Meanwhile, bonds in 1992 and 1995 were not formally reoffered to investors.
The 1995s and 2005-08 maturities are insured by the AMBAC Indemnity Corp. and are triple-A rated by Moody's Investors Service and Standard & Poor's Corp. The remaining maturities are rated A1 by Moody's and AA-minus by Standard & Poor's.
Meanwhile, secondary trading was brisk, traders said, with sizable blocks of bonds changing hands and little bid-wanted activity.
One trader said some blocks of Houston GO 6-1/4s of 2012 around 6.42%, about 1/4 point higher on the day.
In other dollar bond trading, New Jersey Highway Authority Garden State Parkway general revenue 6-1/4s of 2014 were quoted at 98-3/4-7/8 to yield 6.35%, Intermountain Power Agency 6s of 2012 were quoted at 95-1/2-96 to yield 6.40%, and New York City Water Authority AMBAC 6.20s of 2021 were quoted at 97-7/8-98 to yield 6.36%. Triborough Bridge and Tunnel Authority AMBAC 6-1/4s of 2012 were quoted at 99-1/8-3/8 to yield 6.32% and South Carolina PSA 6-5/8s of 2031 were quoted at 100-1/4-3/8 to yield 6.60%.
In the short-term sector yesterday, participants said that most investors were focused on new issues, with few noted trading in the secondary.
Late in the day, Los Angeles Trans 3-3/4s of July were quoted at 2.95% bid, 2.90% offered; San Bernardino Co., Calif., Trans 3-3/4s were quoted at 3.05% bid, 3.03% offered; Pennsylvannia Tans 5s were quoted at 5.40% bid, 5.25% offered; and New York State Tans 3.65s were quoted at 2.85% bid, 2.80% offered.
Pre-refunded bond traders said that action was brisk yesterday with several large blocks changing hands.
In heavily traded names, 1995 pre-refunded bonds were trading at 4.57% bid, 4.25 offered, while 1996s were quoted at 4.57% bid, 4.55% offered.
Smith Barney, Harris Upham & Co. tenatively priced $60 million of Boynton Beach,Fla., Utility System revenue bonds.
The offering included serial bonds priced at par to yield from 3% in 1992 to 6.20% in 2006. A 2012 term was priced as 6-1/4s to yield 6.38% and a 2020 term was priced as 6-1/4s to yield 6.41%.
The bonds are FGIC-insured and rated triple-A by Moody's, Standard & Poor's, and Fitch Investors Service.