Tax-exempt prices closed unchanged Friday after rising 1/8 to 1/4 point on jobs data, and market observers predicted that bonds would stick to a narrow price range in the face of this week's $2.8 billion new issue slate.
The market had been on hold last week, waiting for the employment data. Treasury prices jumped when October non-farm payrolls fell 1,000, well below the consensus forecast of a 20,000 gain, and the unemployment rate rose 0.1-point to 6.8%. Municipals lagged in the distance with prices unchanged to up as much as 1/4 point in light trading. But the market settled back down by mid-afternoon and trading ceased ahead of the weekend.
"In the near-term, prices won't get a whole lot higher," said David Madigan, a vice president and manager of Merrill Lynch's municipal strategy group. "The market is likely to stay in a trading range and the influence of Treasuries will be muted."
Mr. Madigan noted that the economic numbers this weeks will have a major bearing on prices.
The Labor Department releases non-farm productivity for the third quarter tomorrow, but the most important data will be initial jobless claims for the week ending Oct. 26, and consumer credit for September to be released on Thursday.
"Jobless claims will be important for awhile and there's no indication or suggestion that the mid-to-late October data will be any better than the early October data," said Lawrence Krohn, a senior economist at Lehman Brothers. "We're forecasting a discount rate cut very soon as the economy looks weak every place you look."
In addition, the market faces near record supply as issuers rush to market to capture the latest drop in interest rates.
The Bond Buyer's 30-day visible supply jumped $1.3 billion, to $4.8 billion Friday. That's the highest level since Aug. 5, when visible supply totaled $5.4 billion.
Approximately $2.8 billion in securities will be priced this week, which includes $2.4 billion competitives, a high for 1991.
The competitive sector features $321 million Pennsylvania full faith and credit general obligation bonds and $225 million Rhode Island Convention Center Authority revenue bonds.
The negotiated sector features a myriad of sizable issues, including $600 million Houston water and sewer revenue bonds, to be priced by First Boston, $300 million San Diego County Water Authority water revenue certificates of participation, to be priced by Prudential Securities, and $189 million Piedmont Municipal Power Agency electric revenue bonds, to be priced by Donaldson, Lufkin & Jenrette Securities.
Mr. Madigan noted that retail investors have moved out of the secondary cash market and into bond funds, but underlined that demand still remains strong.
After Friday's jobs data, bonds began to move out of competitive deals to investors at or near original levels, traders said.
"The Street got bailed out by the market," Mr. Madigan said. "With the rally, deals got put away."
In follow through business, Bank of America, senior manager for $404 million California GOs, reported an unsold balance of $7.4 million late Friday.
First Boston, senior manager for $272 million Georgia GOs, reported an unsold balance of $34 million. And Goldman, Sachs, senior manager for $158 million Missouri third state building GO refunding bonds, reported an unsold balance of $10.7 million late in the session.
Secondary trading was light Friday with moderate bid-wanted flow.
In secondary dollar bond trading, some bond prices increased 1/8 to 1/4, but most were unchanged, traders said.
North Carolina Eastern 6 1/2S of 2017 were quoted at 96 7/8-lock to yield 6.75%. Denver Airport 7 3/4S, due 2021, were quoted at 94-1/4 to yield approximately 8.27%. New York City Water Authority 7S of 2015 were quoted at 99 1/4-1/2 to yield 7.03%, while Washington Public Power Supply System 6 7/8S of 2017 were quoted at 99 1/2-5/8 to yield 6.90%. Massachusetts Water Resources Authority 6 1/2S of 2019 were quoted at 95 1/8-1/4 to yield 6.90%.
Meanwhile, short-term note yields fell five basis points in spots.
In late secondary trading, Los Angeles Trans were quoted at 4.05% bid, 4.00% offered. Texas Trans were quoted at 4.00% bid, 3.95% offered and Pennsylvania Tans were quoted at 4.12% bid, 4.10% offered. March New York State Trans were quoted at 4.88% bid, 4.85% offered, while New York City Rans were quoted at 4.95% bid, 4.90% offered.
The Calleguas Municipal Utility District, Calif. plans to offer $63 million certificates of participation for a water system improvement project. The bonds will be sold competitively on Nov. 20.
O'Brien Partners Inc. is serving as financial adviser.