Last Friday's firm tone continued yesterday, but activity was light due to the holiday.
Prices were unchanged at the end of yesterday's abbreviated session, but market participants reported good demand for new issues and unsold balances decreased.
In the debt futures market, the December municipal contract closed at 1 p.m. eastern daylight time, up 5/32 to 95.13. The December MOB spread was calculated at negative 161.
Trading was virtually nonexistent, but light new-issue activity in the negotiated sector saw Merrill Lynch & Co. tentatively price $75 million of Connecticut general obligation capital appreciation college savings bonds.
The offering included serials tentatively priced to yield 5.40% in 1996 to 6.60% in 2011.
The issue is rated Aa by Moody's Investors Service, AA-minus by Standard & Poor's Corp., and AA-plus by Fitch Investors Service.
In follow-through business, Kidder, Peabody, & Co., senior manager for $225 million of Rhode Island Convention Center Authority revenue bonds, reported an unsold balance of $67 million.
First Boston Corp., senior manager for $193.5 million of Nevada state bonds, reported an unsold balance of $4 million.
Merrill Lynch freed $255 million of California Housing Finance Agency home mortgage revenue bonds from syndicate restrictions on Friday. The non-AMT 6.85s of 2011 were quoted at 99 3/8-5/8 to yield 6.88%.
This week's slate is lighter than the previous two weeks, but the primary sector will face heavy calendars starting next week, dominated by the sale of $1.6 billion of New Jersey Turnpike refunding bonds.
The market still must move through several sizable issues this week, dominated by $506 million of California State Public Works Board lease revenue bonds, to be priced by Merrill Lynch; $423 million of Metropolitan Transportation Authority, N.Y., revenue bonds, to be priced by Goldman, Sachs & Co.; and $149 million of Kentucky State Property and Buildings Commission revenue and revenue refunding bonds, also to be priced by Merrill Lynch.
Topping the competitive slate are $226 million of New York State general obligation bonds.
Market participants say the issues are likely to be priced to sell and that issuers will continue their orderly march through the primary.
Looking ahead, the market faces increasing supply as issuers rush to market to beat the upcoming holiday doldrums. The Bond Buyer's 30-day visible supply rose again yesterday, topping $5.6 billion.
Secondary activity was light yesterday, and traders reported most bonds unchanged to slightly firmer in spots.
Despite heavy new issuance, the Standard & Poor's Blue List of dealer inventory fell to $1.17 billion yesterday from Friday, indicating good selling to permanent investors.
Very few blocks of bonds reportedly changed hands yesterday and the bid-wanted wires were quiet.
In secondary dollar bond trading, Denver Airport 7 3/4s of 2021 were quoted at 93 1/4-3/4 to yield approximately 8.32%. North Carolina Eastern 6 1/2s of 2017 were quoted as 97-1/2 to yield 6.70%. Washington Public Power Supply System 6 7/8s of 2017 were quoted at 99 1/4-1/2 to yield 6.91%, and Massachusetts Water Resources Authority 6 1/2s of 2019 were quoted at 95 1/4-1/2 to yield 6.89%.
Short-term note yields were unchanged on the day in quiet dealings.
In late secondary trading, Los Angeles Trans were quoted at 4.10% bid, 4.05% offered. March New York State Trans were quoted at 4.90% bid, 4.85% offered, and New York City Rans were quoted at 4.90% bid, 4.85% offered. Texas notes continue to show the lowest yield in the note market and were quoted at 4.05% bid, 4.00% offered in late cash trading.