Freed by good technicals and favorable economic data, bulls abounded in the tax-exempt market yesterday, despite a skittish Treasury sector.
Traders put prices unchanged to up slightly in spots in light secondary trading, but added that the tone was very firm as supply dissipated and bonds continued to be placed with permanent investors.
Jobless claims and housing data had little effect on tax-exempt prices, but the Treasury market headed lower ina correction after Wednesday's strong rally. Municipal futures dipped slightly but the cash sector had a firm tone near the end of the session.
Tax-exempts also outperformed Treasuries in the debt futures market with the September municipal contract settling down 6/32, to 93.12, while the government bond fell 10 ticks. The MOB spread closed at negative 130.
On the economic front, initial state unemployment insurance claims were reported up 8,000, to a seasonally adjusted 408,000 in the week ended Aug. 3, and July housing starts climbed 3.7% to a seasonally adjusted annual rate of 1.07 million units, the fourth monthly increase in a row. But the numbers had virtually no impact on tax-exempt prices.
After a month marked by record supply, The Bond Buyer 30-day visible has dropped to $2.16 billion -- its lowest level since July 29. And The Blue List total of municipal is below $1 billion, at $974 million.
In light negotiated new-issue activity, a First Boston Corp. account tentatively priced and subsequently repriced $106 million Royal Oak Hospital Finance Authority, Mich., hospital revenue bonds to lower yields two basis points in 2011, three basis points in 2020, and five basis points in 2004-08.
The final terms included a 2011 term priced to yield 7.035% and a 2020 term, containing $79 million of the loan, tentatively priced to yield 7.078%.
There also were capital appreciation bonds priced to yield from 6.95% in 2004 to 7.05% in 2008 -- returns five basis points less than the preliminary levels.
The issue is rated double-A by Moody's Investors Service and Standard & Poor's Corp.
In other primary action, Bank of America, senior manager for $1.2 billion California State various-purpose general obligation bonds, freed the issue from syndicate restrictions.
Traders reported moderate activity around smaller retail lists, but trading was more active than in past sessions.
In secondary dollar bond trading, prices were mostly unchanged.
New Jersey Turnpike Authority 7.20s, due 2018, were quoted unchanged late in the day at 103 1/8-1/2 to yield 6.59% to the par call in 1999 and 6.60% to the premium call in 1993. Florida State Board of Education 7 1/4 of 2023 moved up to 103 5/8-3/4 to yield 6.80% to the 2004 par call, while a more recent issue of 6 3/4s of 2021 was unchanged at 98 3/4-7/8s, where they returned 6.84%.
In the New York market, Triborough Bridge and Tunnel Authority insured 6s of 2019 were up 1/8 to 90 1/4-1/2 to yield 6.76%.
In other dollar bond activity, Puerto Rico Electric Power Authority 7s of 2021 were quoted near the close at 98 5/8-7/8 to yield 7.09%.
In the short-term note sector, yields on issue sank as much as 10 basis points, while other names were unchanged.
New Jersey notes were quoted near the end of cash at 4.60% bid, 4.55% offered. June California notes were quoted at 4.65% bid, 4.60% offered and New York City notes also at 4.65% bid, 4.60% offered.
Prerefunded bonds were unchanged on the day. Issues callable in 1995 were quoted at 5.65% bid, 5.60% offered.