The market faces some sizable new issues this week, but market players were optimistic new deals would be met by eager investors.
Prices were mixed Friday, thanks mostly to light volume during a session that was abbreviated after a severe storm slammed into New York City.
But traders said the tone was firm at the open, indicating the market was ready to break out of the current range, with key resistance at 7.41% on the Treasury long bond.
But at least $4.4 billion of new bond deals are scheduled to be priced this week, and volume could grow, depending upon how yields react to the supply pressure.
The wave of supply is expected to be the last of a bulk of issuance rushed to market before yearend. Traders said they expected supply pressure to ease and demand to increase after the holiday season.
"There's plenty of money to be invested," a trader said. "If the deals are priced properly, they should still go away and then we're through most of the supply."
The negotiated sector is dominated by $450 million of Orlando Utility Commission, Fla., water and electric revenue refunding bonds, to be priced by Bear, Stearns & Co.; $303 million of New York Local Government Assistance Corp. general obligation bonds, to be priced by Lehman Brothers; and $270 million of New Jersey Housing and Mortgage Finance Agency multi-family revenue bonds, also to be priced by Lehman Brothers.
The competitive sector is dominated by $138 million of Fairfax County, Va., improvement refunding bonds and $100 million of Pendleton County, Ky., revenue bonds.
Depending upon the tenor of the market, however, other sizable deals could appear, including more than $1.6 billion of New Jersey refunding bonds.
Action was muted Friday, but traders said a firm tone in the morning prompted some blocks to change hands.
For the second session in a row, the long Treasury bond hold investor confidence thanks to good inflation news while short-term securities moved lower on more evidence the economy is improving.
The consumer price index rose a seasonally adjusted 0.2% in November, the Labor Department reported.
Retail sales in November rose 0.4% as consumer purchases of both durable and nondurable goods posted similar gains, the Commerce Department reported.
Municipals paid little heed to the news, and activity died down quickly after midmorning.
In the debt-futures market, the March contract settled down 9/32 to 96.19.
In light new-issue action, $65 million of Anderson County, Tex., refunding revenue bonds for the Coffield Prison Farm project were won by J.P. Morgan Securities with a net interest cost of 5.6869%.
The firm reported all bonds sold by early afternoon.
Serial bonds were reoffered to investors at yields ranging from 2.80% in 1993 to 6% in 2006.
The bonds are insured by the AMBAC Indemnity Corp. and triple-A rated by Moody's and Standard & Poor's.
In secondary dollar bond trading prices were unchanged to up 1/4 point.
Near session's end, Brazos River Authority, Tex., AMBAC AMT 6 1/2s of 2027 were quoted at 99 5/8-7/8 to yield 6.52%; Houston Water and Sewer 6 3/8s of 2014 were quoted at 99 1/2-3/4 to yield 6.41%; and MBTA 6.10s of 2023 were quoted at 96 1/4-none to yield 6.38%.
Georgia MEAG 6 3/8s of 2016 were quoted at 99 5/8-100 to yield 6.40%; North Carolina Catawba 6 1/4s of 2014 were quoted at 98 7/8-99 1/4 to yield 6.34%; and Denver Airport AMT 6 3/4s of 2022 were quoted at 95 1/4-1/2 to yield 7.13%.
Warren IDA Lowered
Moody's Investors Service on Friday cut its rating to B from Ba on about $86.8 million of resource recovery bonds issued by the Warren and Washington Counties Industrial Development Agency.
In announcing the downgrade, Moody's said. "Despite the ability of the agency to meet its debt service payment due Dec. 15, the ongoing refusal of Warren and Washington counties to fully comply with their contractual obligations to make monthly payments, the questionable economic feasibility of the plant from the counties' perspective, and the significant uncertainty regarding payment of future debt service result in a deterioration of bondholder security."