Municipal prices stabilized yesterday as a volatile week neared its close, but neither bear nor bull emerged as a victor and near-term price prospects remained uncertain.
Municipal bonds marked time in light trading yesterday after two rocky sessions. The market had been marred by price drops when the government long bond moved through 7% and $3 billion of new deals hit the market earlier in the week.
But the Treasury market found support behind 7% on Wednesday, and stayed below that level yesterday, alleviating fears of a big drop for the municipal market.
Municipal traders reported widespread selling in the secondary, and the tone remained heavy. But bonds were mixed by session's end yesterday, even as new issues were freed to trade in the secondary market.
In the debt futures market, the June municipal contract settled down 2/32, to 100.03.
Reflecting price support in the broader market, bonds from the week's major deals broke near the original reoffering levels.
Goldman, Sachs & Co. freed $796 million of Washington Public Power Supply System refunding revenue bonds from syndicate restrictions.
In late trading, the MBIA 5.70s of 2017 were quoted at 96 1/4-3/8 to yield 5.99%. The bonds were originally priced to yield 5.97%.
In addition, MBIA announced it had limited secondary insurance for the bonds, limiting enhancement to $5 million per firm.
In other follow-through business, Merrill Lynch & Co. freed bonds to trade from a $583 million Texas Municipal Power Agency refunding revenue deal.
The MBIA 5 1/4s of 2012 were quoted at 5.80% bid, 5.78% offered, where they were originally priced to yield 5.80%.
Morgan Stanley & Co. freed revenue term bonds to trade from $535 million of California Department of Water Resources Central Valley project water system bonds.
The 5 1/2S of 2023 were quoted at 5.86% bid, 5.84% offered in late trading. The bonds were originally priced to yield 5.87%.
Looking ahead, market players noted that, unless buyers swooped in to take prices higher, yields would likely stick to a range. The first price-moving news is likely to be the release of the employment report in two weeks, unless there is a leak from Tuesday's meeting of the Federal Open Market Committee or a break in the budget tangle in Washington, traders said.
A syndicate led by J.C. Bradford & Co. tentatively priced $320 million general obligation refunding bonds for the Metropolitan Government of Nashville and Davidson County, Tenn.
The deal was postponed on Wednesday due to market conditions.
Serial bonds were priced to yield from 2.75% in 1994 to 5.50% in 2008. The bonds are rated double-A by Moody's and Standard & Poor's.
Morgan Stanley & Co. priced $205 million of refunding certificates of participation for the San Diego County Capital Asset Leasing Corp.
Serials were priced to yield from 2.90% in 1994 to 5.45% in 2005. Bonds from 2006 through 2012 were not formally reoffered to investors.
The offering is insured by the AMBAC Indemnity Corp. and rated triple-A by Moody's and Standard & Poor's.
Smith Barney, Harris Upham & Co. tentatively priced $123 million of Palm Beach, Fla., criminal justice facilities revenue refunding bonds.
Serial bonds were priced to yield from 2.75% in 1994 to 5.60% in 2011.
The bonds are insured by the Financial Guaranty Insurance Co. and rated triple-A by Moody's, Standard & Poor's, and Fitch.
First Albany Corp. tentatively priced $99 million of GO refunding bonds for Albany County, N.Y.
The offering included serial bonds priced to yield from 2.65% in 1994 to 5.40% in 2007. A 2014 term, containing $21 million of the loan, was priced as 5s to yield 5.60%. The bonds are FGIC-insured and rated triple-A by Moody's, Standard & Poor's, and Fitch.
Traders reported several sizable bid-wanted lists in the secondary, but trading was moderate, they added. One list was said to total about $52 million out from a fund, while another list, made up of New York items, totaled about $25 million.
In other news, Merrill Lynch warned syndicate members yesterday about breaking syndicate restrictions on a $336 million Fulton-Dekalb Hospital Authority deal it priced earlier this week.
The firm confirmed that it reminded its syndicate members that trade restrictions were still in place after it became aware that some members were offering bonds from the deal below the original issue price.
Several market sources noted that they approved of Merrill's move to enforce syndicate restrictions, but also to support their deal.
Richard J. Visconti, senior vice president of municipal underwriting at WR Lazard, Laidlaw & Mead Inc., a member of the syndicate, said he was pleased to receive notice from Merrill.
He said the deal came to market during a volatile time, leaving syndicate members with bonds in a down market. Through the notice, he said, Merrill let its syndicate members know it would support the bond issue in the secondary.
"It's a good thing for the senior manager to do when the market is shaky," he said yesterday. "You know there will be a bid for your bonds and they will support you. Most of the time senior managers don't tell you anything and you're completely in the dark."
In secondary dollar bond trading, prices were mixed on the day, traders said.
In late action, Los Angeles Department of Water and Power of 2030 were quoted at 99 5/8-7/8 to yield 5.875%; Chicago GO FGIC 5 5/8S of 2023 were quoted at 95 1/4 to yield 5.99%; and Florida DOT FGIC 5s of 2019 were quoted at 5.74% bid, 5.71% offered.
The New York State Dormitory Authority is scheduled next week to sell an issue tentatively sized at $800 million of revenue bonds to refund City University of New York various resolution new- money and refunded bonds, according to a dormitory official.
Goldman Sachs will serve as senior manager for the offering, which is slated for sale on May 26, the authority official said.