Municipal market participants were glowing at the end of yesterday's trading session as a slate of new deals was well received and the secondary market continued to improve.
Investors yesterday shrugged off the Federal Reserve's so-called beige book, which reported that all sectors of the economy were showing improvement. The market took it in stride because many economists had been forecasting the improvement.
A dearth of important economic releases and a slate of over $1 billion in mostly well-received new deals helped the tax-exempt market maintain its current firm tone.
Light supply continued to be a boost for the tax-exempt market yesterday. The Bond Buyer's visible supply for the next 30 days was reported at $3.53 billion. Standard & Poor's Corp.'s Blue List, which measures dealer holdings, stood at $1.48 billion.
Futures continued to improve, and the June municipal contract settled up 4/32, to 96.16, and the September contract was up 4/32, to 95.14.
Traders said that the primary market garnered bulk of investor interest yesterday as several large new deals were priced with yields lowered at several repricings.
The largest deal of the day was the negotiated pricing and repricing of $230 million of Virgin Islands Public Finance Authority revenue refunding bonds by a group led by Bear Stearns & Co.
The deal is divided into two sections. The first consists of $212 million of Series 1992 A bonds.
It contains serial bonds priced to yield from 6.25% in 1996 to 7.00% in 2002, and a $176 million term bond maturing in 2018 and priced at par to yield 7.25%.
The second portion of the loan consists of $17.7 million taxable Series 1992 A bonds that mature in 1995 and are priced to yield 7.50%.
At the repricing, yields on the 1998 through 2002 serial bonds were lowered 10 basis points and 12 1/2 basis points on the 2022 term bond.
The competitive market was highlighted by First Boston Corp.'s winning $193 million of Florida Department of Transportation revenue bonds with a true interest cost of 6.3996%.
The FGIC-insured debt was structured to include serial bonds priced to yield from 3% in 1993 to 6.30% in 2009.
The loan also contains two term bonds. The size of the first term was $21 million and matures in 2012 and was priced as 6.30s to yield 6.35%.
The second term matures in 2022 and consists of $106 million of the total loan and was priced as 6.35s. The 2022 term was not reoffered to investors.
Late in the session, First Boston reported an unsold balance of $7.1 million.
In other competitive deals, a group led by Lehman Brothers won an issue of $115 million of Fairfax Co., Va., unlimited tax public improvement refunding bonds with a true interest cost of 5.6192%.
The loan consists of serial bonds priced to yield from 3.90% in 1994 to 6.15% in 2008.
The issue is rated triple-A by Moody's Investors Service and Standard & Poor's Corp.
Late yesterday, Lehman Brothers reported that there was an unsold balance of $36 million in the deal.
An issue of $613 million of South Carolina Public Service Authority revenue bonds was priced and repriced by a group led by Goldman, Sachs & Co.
The loan contains serials priced to yield from 3.25% in 1993 to 6.40% in 2008.
There are also two term bonds. The first matues in 2011 and is priced as 6 3/8s to yield approximately 6.513%. The second matures in 2021 and is also priced as 6 3/8s to yield 6.50%.
The bonds are rated A-plus by Standard & Poor's Corp. and Fitch Investors Service.
The 2021 term bond is AMBAC-insured and carries a triple-A rating.
At the repricing, a 2008 maturity was added.
Lehman Brothers priced an issue of $110 million of Vermont Student Assistance Corp. education loan finance program revenue bonds.
The loan consists of serial bonds priced to yield from 5.90% in 1999 to 6.50% in 2005.
The loan is structured to have $55 million due on June 15 of the year that the bond matures and $55 million due on Dec. 15.
The debt is insured by Financial Security Assurance Corp. and rated triple-A by Moody's Investors Service and Standard & Poor's Corp.
Merrill Lynch & Co. priced and repriced an issue of $77 million Washington Health Care Facilities Authority revenue bonds.
The loan was structured o include serial bonds priced to yield from 4.75% in 1995 to 6.35% in 2007.
The loan also contains four term bonds. The first term matures in 2011 and was priced as 6 1/2s to yield 6.65%; the second matures in 2013 and was priced as 6 1/8s to yield 6.50%; the third matures in 2018 and was priced as 6 1/4s to yield 6.55%. The final term matures in 2022 and was priced as 6s to yield 6.70%.
Except for the 1997, 2000, 2001, 2011, and 2022 term, the debt is FGIC-insured and triple-A rated. The uninsured term has been given an A1 rating.
At the repricing, yields were lowered by as much as five basis points in 2007.
A group led by Legg Mason Wood Walker Inc. priced an issue of $47 million University of Maryland system equipment loan program bonds.
The loan is divided into two portions. The first is made up of $25 million first series obligation bonds and contains serial bonds priced to yield from 2.60% in December 1992 to 5.10% in 1997.
The second portion of the loan, $21 million second series obligation bonds contains serial bonds priced to yield from 2.60% in December 1992 to 6.15% in 2007.
The issue was rated Aa by Moody's, AA-plus by Standard & Poor's, and AA-minus by Fitch.
Secondary participants described trading as "lackluster," with few bonds moving around the secondary sector.
One trader said that the tone of the secondary improved throughout most of the morning, but dipped slightly after the release of the beige book by the Fed.
However, shortly after the release of the report, the market turned back up and finished the day up 1/8 to 1/4 point.
Georgia Municipal Electric Authority AMBAC 6.40s of 2013 were quoted at 99 7/8-100 1/8 to yield 6.41% on the bid side; Triborough Bridge and Tunnel Authority AMBAC 6 1/4s of 2012 were quoted at 98 3/4-7/8 to yield 6.36%, and South Carolina PSA 6 5/8s of 2031 were quoted at 99 5/8-7/8 to yield 6.65%. California 6 1/4s of 2012 were quoted at 97 7/8-98 1/4 to yield 6.44%, and Oklahoma Turnpike Authority MBIA 6 1/4s of 2022 were quoted at 97 7/8-98 1/4 to yield 6.41%.
Short-term traders reported an uneventful day, with few notes moving in the secondary.
Late in the day, California Rans 3 1/4s were quoted at 4.10% bid, 4.00% offered; Los Angeles Trans 5 1/4s were quoted at 4.08% bid, 4.01% offered; Pennsylvania Tans 5s were quoted at 4.10% bid, 4.00% offered; and New York State Trans were quoted at 2.87% bid, 2.85% offered.
In pre-refunded bond trading, bonds with national names, callable in 1995, were quoted at 4.66% on the bid side and 4.60% on the offered side, while bonds callable in 1996 were quoted at 4.96% bid, 4.89% offered.