Municipal bonds idled yesterday, waiting for direction from next week's June employment data, but institutions have begun to buy in anticipation of upcoming coupon payments.
Traders quoted prices mostly unchanged to up 1/4 point in spots, while high-grade yields were unchanged on the day.
In debt futures trading, the September municipal contract settled up 5/32 to 90 19/32 with the September MOB spread closing at negative 75.
Yesterday's positive economic data failed to force tax-exempt prices lower.
Personal income increased 0.5% in May for the fourth consecutive month -- the biggest gain all year -- while initial state unemployment insurance claims declined 17,000 to a seasonally adjusted 431,000 in the week ended June 15.
Prices dipped slightly on the news, but only momentarily. The subsequent gains were made in sympathy with the Treasury market, which drifted slightly higher.
Market participants said they expect prices to remain stable until the employment data is released next Friday.
Today, May leading indicators are expected to show a 0.6% increase, matching the April gain, according to 15 economists surveyed by The Bond Buyer. The Chicago-Area Purchasing Managers' Association report also will be released today.
In light negotiated new-issue activity yesterday, Dillon, Read & Co. tentatively priced $93 million of Kentucky Development Finance Authority Hospital Facilities revenue and improvement bonds for the St. Elizabeth Medical Center project.
The offering includes serials tentatively priced to yield from 4.50% in 1991 to 6.40% in 1999.
A 2004 term with a 6 5/8% interest rate is not being formally reoffered, while a 2010 term, containing $39 million of the loan, is tentatively priced as 6s to yield 7.10%.
The bonds are backed by the Financial Guaranty Insurance Co. and triple-A rated by Moody's Investors Service and Standard & Poor's Corp.
Competitive new issuance was also light. A $62 million Clark County, Nev., general obligation limited tax airport bond issue topped the calendar and was won by a Smith Barney, Harris Upham & Co. account with a true interest cost of 6.956%.
By session's end, Smith Barney reported an unsold balance of $25.5 million.
The serial bonds were priced to yield from 5% in 1992 to 7.05% in 2011.
They are backed by Financial Guaranty Insurance Co. and are triple-A rated by Moody's and Standard & Poor's.
A $40 million issue of Minneapolis-Saint Paul Metropolitan Area unlimited tax general obligation sewer bonds was won by a First Boston Corp. group with a true interest cost of 6.7072%.
The bonds were priced to yield from 5.60% in 1955 to 6.90% in 2012 and sold down to an unsold balance of $20.5 million late in the session.
The issue is rated tripe-A by Moody's and Standard & Poor's.
In secondary trading, some traders reported moderate business in the morning, mostly from funds who expect large coupon payments on July 1.
Supply has helped keep secondary trading at bay and market participants cite a growing shadow calendar. But the 30-day visible supply totals only $1.27 billion, down $473 million from Wednesday and off $1.69 billion from last Friday. Municipal inventory in Standard & Poor's The Blue List slipped to $1.35 billion from $1.46 billion Wednesday and from $1.49 billion Friday.
In other action, there was a $148 million bid-wanted list out from a casulaty company. Traders said many of the items traded, but activity subsided in the afternoon.
Continuing fiscal problems in New York State and New York City also sent some reverberations through the market. There were some New York City bonds out for the bid and longer maturities traded around an 8.48%, traders said.
"There is no panic selling," a New York trader said. "The activity is mostly institutional buyers looking to take a profit on the bonds they bought at the city's last GO offering."
Goldman, Sachs & Co., as senior manager, made allotments on Tuesday's $399.6 million Triborough Bridge and Tunnel Authority revenue bond offering.
Traders said the maximum term bond of 2020 was trading professionally around the original 7.229% net.
In secondary dollar bond trading, Florida State Board of Education 7 1/4s of 2023 were quoted unchanged at 100 3/8-101 1/4 to yield 7.10% to the par call in 2004. New Jersey Turnpike Authority 7.20s of 2018 were up 1/8 to 101 1/2-102 to yield 6.86% to the 1999 par call.
Short-term notes were mostly unchanged, but several traders predicted lower yields next week thanks to coupon reinvestment.
March New York State 5.40% notes were quoted near the end of cash at 5.14% bid, 5.12% offered, while December New York State TRANs were quoted at 4.75% bid, 4.70% offered. And Los Angeles County 5s were quoted at 4.54% bid, 4.52% offered.
Prerefunded bonds were also unchanged in quiet trading. Issues with a 1995 call were quoted at 5.98% bid, 5.95 offered. Bond prerefunded into 1996 were quoted at 6.02% bid, 6% offered near the end of cash.