Sellers emerged going into the close of municipal trading yesterday, pushing prices down 1/8 to 1/4 point as the market fidgeted nervously ahead of today's long-awaited unemployment data.
Trading has been subdued for two weeks, as many market participants were biding their time hoping for weak employment data which would likely spur an ease in monetary policy by the Federal Reserve Board. But late yesterday, a number of small bid lists flowed into the secondary, participants said.
In the debt futures market, the December municipal futures contract settled down 4/32 to 92.22 with the December MOB spread calculated at negative 137.
Opinions varied as to market vulnerability, but many traders speculated that tax-exempt bonds have a greater downside potential compared to chances for price improvements.
"If the number is bad, this market is going down," one New York-based trader said late yesterday. "Bids have been very weak this afternoon and people are getting nervous. If Treasuries give back a lot of ground we're going to lose money."
Some traders, however, said underlying market strength and continued demand for municipals will buoy the market, despite a price adjustment. "We're seeing some institutional selling, but it's been very orderly," another trader said.
Today's August employment report will show an increase of 25,000 in non-farm payrolls and a 0.1-point rise in the unemployment rate, to 6.9%, according to analysts surveyed by The Bond Buyer. Economists' forecasts for payrolls ranged from a decline of 45,000 to an increase of 90,000.
The primary sector was lackluster, but a group led by Goldman, Sachs & Co. tentatively priced approximately $100 million Rhode Island Health and Educational Building Corp. hospital financing revenue bonds. The issue was made up of fixed-rate bonds as well as periodic auction reset securities and inverse floating rate securities.
Pricing details were not available before press time.
In other action, Goldman as senior manager freed $602 million California various purpose taxable general obligation bonds from syndicate restrictions. In late secondary trading, the 8.15s of 2001 were quoted at 98 3/4-99 to yield 8.29%, where they were originally offered at 8.15%.
New issuance continues to be light but the 30-day visible supply crept over the $2 billion mark yesterday for the first time since Aug. 19. Supply totaled $2.34 billion, which is up about $604 million from the previous session and up $1.55 billion from last Thursday, when it set a low for the year at $798 million.
Standard & Poor's Corp.'s Blue List of municipal bonds slipped $7.4 million lower to $1.43 billion. That's off $94 million from last Thursday.
In the short-term sector, note yields rose about 10 basis points on the bid-side as bid-wanted lists increased, traders said.
"Usually at this time of the month we have cash from the funds," one trader noted. "It's surprising that the funds don't seem to have the money there. All we saw was stuff coming out for the bid all day."
In secondary trading, Los Angeles notes were quoted at 4.70% bid, 4.65% offered as were New Jersey notes. March California notes were quoted at 4.65% bid, 4.60% offered, while June California notes ended the session at 4.70% bid, 4.65% offered. New York State Trans were quoted near the end of cash trading at 5.23% bid, 5.20% offered.
The sector faces significant upcoming supply from $1 billion of Texas notes, $1.4 billion Pennsylvania notes, and $1 billion Connecticut notes.
Prerefunded bonds continue unchanged, although traders did report some weakness yesterday.
Prerefunded bonds, callable in 1995, were quoted near the end of cash at 5.56% bid, 5.50% offered, while bonds callable in 1996 were quoted at 5.60% bid, 5.55% offered.
In secondary dollar bond trading, New Jersey Turnpike Authority 6.90s of 2014 were quoted unchanged on the day to 99 3/8-1/2 to yield 6.94%. Florida State Board of Education 7 1/4s of 20023 were quoted unchanged at 103 1/2-104 to yield approximately 6.76% to the 2004 par call. New York LGAC 7s of 2016 were quoted down about 1/4 point to 98-1/2 to raise the yield to 7.13%. Puerto Rico Electric Power Authority 7s of 2021 were quoted down 1/8 to 99-1/4, where they returned 7.05%. And Colorado River Authority insured 6 5/8s of 2021 were unchanged at 97 1/8-3/8 to yield 6.83%.
PaineWebber Inc. as senior manager priced and then repriced $64 million certificates of participation for the Atlantic County, New Jersey public facilities lease agreement project to raise yields five basis points in the 1996, 2005, and 2009 maturities.
The final terms included Cops priced to yield from 4.50% in 1992 to 6.60% in 2015.
The issue is insured by Financial Guaranty Insurance Co. and triple-A rated by both Moody's Investors Service and Standard & Poor's Corp.
Wheat, First Securities tentatively priced $55 million Augusta County, Virginia IDA hospital revenue bonds for the Augusta Hospital Corporation project.
The offering included serials priced to yield from 5.25% in 1994 to 6.40% in 2002.
A 2004 term and a 2008 term were not formally reoffered to investors, while a 2012 term yields 6.817% and a 2021 term yields 7.10%.
The bonds are insured by AMBAC Indemnity Corp. and triple-A rated by both Moody's and Standard & Poor's.