Municipals broke their recent string of losses yesterday, thanks to a higher Treasury market, but sellers continued to pound the secondary.
Meanwhile, new issue short- and long-term volume broke through a significant barrier. Through Nov. 22, note and bond volume totaled $300.52 billion, 21% more than the $249.17 billion for the same period last year. For all of 1992, total municipal volume was $277.33 billion.
Of the year-to-date volume, $172.18 billion, or 57%, were refundings. The average size of a municipal deal was about $20 million, compared with $17 million in 1992.
Returning to yesterday's action, government bonds opened significantly higher after traders covered shorts, anticipating a coupon pass by the Federal Reserve. Soon after the New York opening, the 30-year Treasury bond rose 18/32 to yield 6.34%. Municipal debt futures improved with governments, but cash remained stagnant, traders said. Secondary market tone remained heavy, thanks in part to more than $400 million of bonds put up for sale Monday by the same sellers who have battered the market for more than a month.
Reflecting the heavier tone, The Blue List of dealer inventory rose $66.7 million yesterday, to $1.82 billion. Traders reported more sizable bid lists and some large blocks of bonds in the secondary, including $40 million North Carolina Eastern FGIC 51/2s of 2017.
"We're seeing a better bid across the board, but the sellers are right there, trying to sell size," a trader said. "The market can grind higher, but it's got a lot of wood to chop."
The bid for bonds improved more visibly late in the day, after the Treasury 30-year bond rose more than one point to yield 6.29%, thanks to oversold positions and a well received five-year note auction. Tax-exempt traders said the late thrust by the government market frightened some shorts, and bonds made some gains.
The debt futures market outperformed cash handily. The December municipal contract settled Up 28/32 to 101.21, just below the high of 101.22. The MOB spread widened to negative 450 from negative 443 on Monday.
By session's end, cash prices were quoted mixed to up 1/4 point on average.
In late secondary dollar bond trading, prices were more mixed. New York City Municipal Water Authority 51/2s of 2019 were quoted up 1/4 point at 5.83% bid, 5.78% offered; New York City general obligation 53/4s of 2014 were up 1/8 point at 6.12% bid, 6.08% offered; and Chicago O'Hare MBIA 5s of 2018 were quoted up 3/4 at 5.67% bid, 5.65% offered. Florida State Board of Education 51/8s of 2022 were unchanged at 93 1/2-94 to yield 5.48%.
Reflecting the market's overall weakness, Goldman, Sachs & Co. freed $259 million of Housing New York Corp. senior revenue refunding bonds from syndicate restrictions, and the bonds traded down swiftly from the original reoffering levels.
In late secondary trading, the 5s of 2018 were quoted at 5.75% bid, 5.70% offered, where they were originally priced to yield 5.65%.
In light new issue action, Morgan Stanley & Co. priced and then repriced $67 million Norfolk, Va., water revenue bonds.
At the repricing, serial bond yields were lowered by five basis points from 1996 through 2000, by two basis points on the term bonds due in 2013, and by three basis points for bonds due 2023.
Serial bonds were finally priced to yield from 2.80% in 1994 to 5.40% in 2010. A 2013 term was priced as 5.20s to yield 5.531% and a 2023 term, containing $34 million of the loan, was priced as 5 3/8s to yield 5.625%.
Bonds from 1994 through 1996 are rated Al by Moody's Investors Service and A-plus by Standard & Poor's Corp. The remainder of the loan is insured by the AMBAC Indemnity Corp., and rated triple-a by Moody's and Standard & Poor's.