Municipals followed Treasury bonds higher yesterday, but action was minimal as the market continued to waffle in a price range.
Treasuries climbed soon after the open after a jump in weekly jobless claims. Initial state unemployment insurance claims increased 11,000 to a seasonally adjusted 335,000 in the week ended Sept. 18.
Municipals tagged along and the gains were a first for the market this week. Traders reported some buying interest in the secondary.
"People seemed to be walking up a bit." a trader said. "We're still suffering from a general malaise, but we saw some improvement."
Tax-exempt traders reported more bid-wanted lists, despite the price improvement, and they said buyers continue to be picky ahead of next week's calendar. But dollar bond prices regained some of the ground lost earlier in the week, encouraging some market players.
By mid-session, dollar bonds were quoted up anywhere from 1/8 to 1/2 point, depending upon the name of the bond.
Trading was quiet, especially after the Treasury market faded from the highs on stronger car sales in the afternoon. Government traders also said they backed off ahead of today's durable goods report.
Prices stuck to their mid-day range for the remainder of the session.
In late secondary dollar bond trading, South PUB 51/8s of 2032 were quoted up 1/8 at 5.50% bid, 5.48% offered; Guam 5.40s of 2018 were quoted up 1/4 at 88 1/2-99 to yield 5.51%: and South Carolina PSA FGIC 5s of 2015 were quoted up 1/2 at 5.37% bid, 5.35% offered.
Washington Public Power Supply System 53/8s of 2015 were quoted up 3/8 at 5.60% bid, 5.56% offered; New York State Power Authority 51/4s of 2018 were quoted up 3/8 at 991/4-3/8 to yield 5.30%; and Florida State Board of Education 51/4s of 2023 were quoted up 1/2 at 981/4-1/2 to yield 5.36%.
In the debt futures market, the December municipal contract settled Up 9/32 to 103.31, down from a high of 104.09. The MOB spread narrowed slightly from negative 452 from negative 454 on Wednesday.
Secondary supply continued to increase, reflecting the difficulty dealers have had this week finding buyers for bonds. The Blue List of dealer inventory climbed for the tenth straight day, rising $83 million yesterday, to $1.84 billion. Since Sept. 9, the list has climbed $968 million from $874 million. It is now at its highest level since Aug. 5, when it was $1.86 billion.
New-issue action was light, but Bear, Stearns & Co. won $175 million Connecticut state special tax obligation bonds with a true interest cost of 4.8815%. Goldman, Sachs & Co. had the cover bid with a TIC of 4.8841 %.
Bear Stearns reported an unsold balance of about $59 million late in the day.
Serial bonds were reoffered to investors at yields ranging from 3.20% in 1995 to 5.15% in 2011. A 2013 term was priced with a coupon of 5% to yield 5.18%.
The issue is rated Al by Moody's Investors Service, Aa-minus by Standard & Poor's Corp. and by Fitch Investors Service.
In short-term new issue action, Texas awarded $1.375 billion tax and revenue anticipation notes to six firms, who submitted bids of 3.25%. The notes. due Aug. 31, 1994, were reoffered to investors at 2.80% net.
Goldman, Sachs & Co. took $1.15 billion; Citicorp Securities took $50 million; J.P. Morgan Securities Inc. took $50 million; Smith Barney Shearson took $50 million; Donaldson, Lufkin & Jenrette Securities took $25 million; and Bank of America took $50 million of the issue.
The notes are rated MIG1 by Moody's, SP1-plus by Standard & Poor's, and F1-plus by Fitch.
New York City is planning to issue about $600 million in new-money, general obligation bonds in about two weeks, a city source said yesterday.
New York City Deal
Lehman Brothers will act as the lead underwriter. As part of the deal's preparation, city officials will soon be taking proposals from underwriters on derivative products. the city source said.
Also in the works for the city is a tax anticipation note issue and a refunding issue, the source said. Charles Gasparino contributed to this column.