Municipal prices fell 1/4 to 1/2 point Friday as supply weighed on prices, and market players expect new issuance to continue to hold tax-exempts at bay.
The tax-exempt market suffered losses all last week as a flood of bonds descended upon traders already suffering from the consequences of a severe price correction the previous week.
The Treasury market was able to make gains on Friday as traders managed to distribute some of the $36 billion of securities that were sold over the course of the week. But the tax-exempt market sagged as supply troubles of its own prevented any upward movement in sympathy with the government sector.
"We've got too many bonds on our hands, it's as simple as that." said one trader late Friday. "The bid side is grim and there appears to be no letup in supply. New deals are going to come cheaper, and that will reprice the secondary to lower levels. "
By late Friday, prices were quoted down 1/4 to 1/2 point on average, while some bonds lost more ground. For example, Lehman Brothers freed $1.2 billion of New York City general obligation bonds from syndicate restrictions, and the bonds traded down nearly one point from the original pricing. Near session's end Friday, the 6 1/4s of 2021 were quoted at 94 1/4 bid to yield approximately 6.70% compared to the original 6.60%. reoffering yield.
Meanwhile, in the debt futures market, the September municipal contract settled down 5/32 to 98.13. The MOB spread widened to negative 243 from negative 225 Thursday, as municipals headed lower and Treasuries made a solid move higher.
Looking ahead to supply, The Bond Buyer calculated 30-day visible supply at $5.43 billion Friday, while The Blue List of municipal bonds climbed $56.2 million to $1.53 billion.
Approximately $4 billion of new bonds are scheduled to be priced this week, and the calendar shows signs of further growth. Late Friday, the Metropolitan Transportation Authority of New York announced it will price $666 million of Transit Facilities revenue bonds, and the Orange County, Calif., Local Transportation Authority said it will price $525 million of new money bonds the week of Aug. 24.
Dominating pricing activity this week, Texas will auction $1.5 billion of 12-month tax and revenue anticipation notes in the short-term sector. In the longi(erm sector, the negottated caleh-dar-is domk;~inated e>Xgy $624 million of Washington GO and GO refunding bonds, to be priced by Goldman, Sachs & Co.; $588 miflion of Puerto Rico public improvement rcfunding bonds, to be priced by Morgan, Stanley & Co.; and $275 million of Clark.county: Nev., airport revnue bonds, to be priced by Smith Barney, Harris Upahm & Co.
The competitive slate features $385 million of San Francisco revenue bonds, $250 million of luirlois Gos. and $185 million of Los Ange- les Department of Water and Power revenue bonds.
Trading was typically subdued ahead of the weekend and in the face of fading prices.
There were some sizable blocks out for the bid, including $7 million of New York City Water Authority 51/2s and approximately $7 million of East Bay Municipal Utility District 6s, but market sources said that bids for the bonds were weak cnough that the blocks had not traded by mid-session.
In secondary dollar bond trading,
prices were quotcd dovrn 1/4 to as muc4 as 1/2 point.
In late action, Massachusetts Municipal Wholesale Electric 61/26s of 2019 were quoted at 967/8-971/4 to yield 6.36%. San Antonio Electric and Gas Systems 53As of 201 1 were quoted at 96-1/2 to yield 6.02%, and Wisconsin Transportation 5%s of 2022 were quoted at 91-1/2 to yield 6.16%. Los Angeles Department of Water and Power 6s of 2032 were quoted at 971/4-1/2 to yield 6.18%, and New York City Water Authority 6s of 2017 were quoted at 96-1/2 to yield 6.j2%.
In the short-terin note sector,
yields were unchanged to flve basts points higher on the day in light ac- ti6n, traders said.
In late trading, Iowa Trans were quoted at 2.90% bid, 2.85% offered, Los Angeles Trans were quoted it 2.80% bid, 2.75% offered, and Wis- consin notes were quoted at 2.88% bid, 2.85% offered. New York City tax anticipation notes were quoted at 2.70% bid, 2.65% offcred and New York State Trans were quoted at 2.85% bid, 2.80% offered.