Municipals continued their ragged retreat yesterday hemmed in by a steady bid-wanted flow and poorly received deals.
The credit markets opened lower for the fourth consecutive day yesterday, dogged by stronger than expected economic indicators. Municipals suffered more dramatically as supply and a dearth of buyers added to downward pressure. Traders quoted tax-free prices down 1/8 point by mid-morning, while the December municipal contract was quoted down 6/32 to 103.30.
Prices moved even lower after stronger than expected economic news. New orders for durable goods grew 0.7% in September to a seasonally adjusted $132.8 billion, the third gain in four months, the Commerce Department said.
The Treasury markets trudged through the remainder of the day, without a lot of progress on either the up side or the down side, traders said. The tax-exempt market was equally as languid, but traders reported heavy selling via secondary blocks. They also said underwriters were selling bonds from unsold portions of recent deals at yields as much as 20 basis points higher than the original reofferings.
By session's end, prices were quoted down 1/4 to 3/8 point on average, but down 1/2 in spots in light trading. For example, in secondary dollar bond trading, Florida Board of Education 5 1/8s of 2022 were quoted down 3/8 at 96 5/8-7/8 to yield 5.35%; Los Angeles DEWAP 5s of 2033 were down 3/8 at 93 1/8-1/2 to yield 5.42%; and Valdez, Alaska 5 1/2s of 2028 were off 1/2 at 98 1/4-3/4 to yield 5.61%.
In other action, Atlanta Water and Sewer 4 3/4s of 2023 were quoted down 1/2 at 5.35% bid, 5.33% offered; New York City 5 1/2s of 2017 were down 1/4 at 5.80% bid, 5.78% offered; and Salt River 4 3/4s of 2017 were off 1/4 at 5.32% bid, none.
In the debt futures market, the December municipal contract settled down 16/32 to 103.20. The MOB spread widened slightly, to negative 476 from negative 471 on Tuesday, as governments fared slightly better than municipals.
Reflecting dealers' continued difficulty in finding buyers, The Blue List of dealer inventory totaled a formidable $2.02 billion yesterday.
In the short-term note market, yields were mixed, traders said. In late action, California Rans were quoted at 2.73% bid, 2.68% offered; New York City Tans were 2.63% bid, 2.55% offered; and Pennsylvania Tans were at 2.72% bid, 2.67% offered.
In light new issue action, a Wachovia Corp. group won $67 million North Carolina prison & youth services facilities refunding bonds, bidding a TIC of 4.638%.
An unsold balance was unavailable late in the day.
Serial bonds were reoffered to investors at yields ranging from 3% in 1995 to 4.85% in 2009.
The issue is rated triple-A by Moody's, Standard & Poor's, and Fitch.
In light negotiated action, Smith Barney Shearson priced $100 million Hawaii Department of Budget and Finance special purpose revenue bonds for the Hawaiian Electric Co.
The firm said it received the verbal award at the original price levels and the account was closed.
The offering, subject to the federal alternative minimum tax, was made up of a 2023 bullet maturity, priced as 5.45s to yield 5.588%.
The bonds are MBIA-insured and rated triple-A by Moody's and Standard & Poor's.