Tax-exempt prices rose in the face of stronger-than-expected economic data yesterday, while $1.5 billion Los Angeles County tax and revenue anticipation notes led another wave of new issues.
U.S. housing starts climbed 11% in May to a seasonally adjusted annual rate of 1.230 million units, but May housing permits, a measure of future building activity, fell 0.7%, to 1.051 million units, according to the Commerce Department.
Bond prices dipped after the housing report, but recovered and then moved higher, even though industrial production increased 0.6% in May, while industrial capacity and utilization increased 0.3-point to 79.0% in May.
Prices finished 1/8 to 1/4 point higher on average, while high-grade yields were unchanged to five basis point lower on the day.
In the debt futures market, the September municipal contract settled up 12/32, to 95.10. The September MOB spread narrowed to negative 153 from negative 154 Monday as tax-exempts nosed ahead of the Treasury market.
Meanwhile, new issues met with mixed results, market players said.
A syndicate led by Morgan Stanley & Co. priced and repriced the Los Angeles Trans, which are noncallable.
Reoffering yields were lowered by five to 10 basis points.
A Morgan Stanley officer said there was good going-away business to permanent buyers, and there would be few notes allotted to the Street.
The final offering included $1 billion of securities priced as 3-3/4s to yield 3.10%, due July 1, 1993 and $500 million notes, priced as 2.80s at par, due July 7, 1993.
The issue was rated MIG-1 by Moody's Investors Service, SP-1-plus by Standard & Poor's Corp., and F-1-plus by Fitch Investors Service.
In other new-issue action in the short-term sector, First Boston Corp. priced $132 million of Michigan Municipal Bond Authority revenue notes.
The offering included notes priced to yield from 2.75%, due Sept. 24, 1992, to 3.30% for notes due July 29, 1993.
In addition, $47 million of the issue is backed by a letter of credit from Sakura Ltd. and $84 million are backed by letters of credit from Comerica.
The managers said they expect a MIG-1 rating from Moody's.
Negotiated New Issues
A syndicate led by Smith Barney, Harris Upham & Co. priced and then restructured $200 million New York City Municipal Water Finance Authority water and sewer system revenue bonds.
Yields were left unchanged, but the deal was restructured to move $20 million of the loan from the 10-year call maturity to the five-year call maturity.
The final offering included $120 million of bonds, callable June 15, 1997, at $101.5, priced as 6-1/2s to yield 6.519% in 2021 and $80 million of bonds, callable June 15, 2002, at $101.5, priced as 6.20s to yield 6.40% in 2021.
The issue is insured by AMBAC Indemnity Corp. and triple-A rated by Moody's Investors Service and Standard & Poor's Corp.
In other action, a syndicate led by PaineWebber Inc. as senior manager priced and repriced $123 million of Connecticut Housing Finance Authority housing mortgage finance program bonds as a remarketing.
Serial yields throughout the loan were lowered by five to 10 basis points.
The final scale included $60 million subseries C-1 bonds priced at par to yield 6.25% in 2005; 6.30% in 2006; 6.35% in 2007; 6.45% in 2011; and 6.60% in 2023. There also was a $62 million subseries C-2 bonds, subject to the federal alternative minimum tax, priced at par to yield from 3.30% in 1993 to 6.30% in 2005 and 6.70% for term bonds maturing in 2022.
The issue is rated Aa by Moody's and AA-plus by Standard & Poor's.
First Boston tentatively priced $119 million California Transit Finance Corp. certificates of participation for the Los Angeles County Transportation Commission.
The offering included serials priced to yield from 3.50% in 1993 to 6.40% in 2004.
The issue is rated A1 by Moody's and A-plus by Fitch.
Finally, Lehman Brothers tentatively priced $100 million Wisconsin Housing and Economic Development Authority home ownership revenue bonds.
The offering included $45 million Series 1 bonds priced to yield 6.60% in 2007, 6.70% in 2012, and 6.75% in 2017. About $55 million Series 2 bonds, subject to the AMT, were priced at par to yield from 3.90% in 1993 to 6.35% in 2002. A 2021 term was priced to yield 6.25%, a 2022 term was priced to yield 6.50%, and a 2024 term was priced to yield 6.875%.
The managers said they expect Moody's to rate the issue Aa; Standard & Poor's confirmed its AA rating.
Competitive New Issues
An issue of $200 million Los Angeles wastewater system revenue bonds was won by Dean Witter Reynolds with a true interest cost of 6.394%.
The firm reported an unsold balance of $58 million late in the session.
The offering included serial bonds priced to yield from 3.25% in 1993 to 6.30% in 2008. A 2012 term was priced as 6-1/4s to yield 6.35% and a 2019 term, containing $70 million of the loan, was priced as 6.40s but was not formally reoffered for sale. A 2022 term was priced as 6s to yield 6.40%.
The bonds are insured by AMBAC and are triple-A rated by Moody's and Standard & Poor's, and A-plus by Fitch.
A bidding group led by Goldman, Sachs & Co. had the cover bid of 6.4047%.
A Merrill Lynch & Co. group won $140 million of Minnesota full faith and credit general obligation state various purpose bonds with a true interest cost of 5.93%.
Merrill reported an unsold balance of $41 million late in the session.
Serial bonds were priced to yield from 2.75% in 1993 to 6.20% in 2008. Bonds in 2009, 2010, and 2011 were not formally reoffered to investors.
The bonds are rated Aa by Moody's and double-A-plus by both Standard & Poor's and Fitch.
There were four bids for the issue, and Goldman was the cover with a TIC of 5.9408%.
An issue of $92 million Virginia Public Building Authority state building revenue refunding bonds was won by PaineWebber, with Wheat First Securities, Alex. Brown & Sons, Kemper Securities, and J.C. Bradford & Co. as co-managers.
The offering, won with a TIC of 6.2229%, included serial bonds priced to yield from 2.90% in 1993 to 6.60% in 2010.
The issue is rated double-A by Moody's, Standard & Poor's, and Fitch.
Secondary action was moderate yesterday as most market players concentrated on new issues. But traders reported good going away business and some sizable blocks of bonds left the Street, including $29 million Florida Board of Education 6s of 2025, which were rumored to have traded or swapped in four different situations. Market sources said some of the bonds may have traded around 6.46%.
"People are of a constructive mind," one trader said. "A lot of bonds have left the Street, and the tone is not as heavy as it was at the end of last week, but the prudent trader is cautious right here."
In secondary dollar bond trading, prices rose 1/8 to 1/4 point on average and 3/8 in spots, traders said.
Georgia Municipal Electric Authority AMBAC 6.40s of 2013 were quoted at 99-7/8-100-1/8 to yield 6.41% on the bid side, Triborough Bridge and Tunnel Authority AMBAC 6-1/4s of 2012 were quoted at 98-5/8-3/4 to yield 6.37% and South Carolina PSA 6-5/8s of 2031 were quoted at 99-1/2-5/8 to yield 6.66%. California 6-1/4s of 2012 were quoted at 97-3/4-98-1/4 to yield 6.45% and Oklahoma Turnpike Authority MBIA 6-1/4s of 2022 were quoted at 97-5/8-7/8 to yield 6.42%.
Short-term traders reported an uneventful day, with few notes moving in the secondary.
Late in the day, California Rans 3-1/4s were quoted at 4.10% bid, 4.00% offered; Los Angeles Trans 5-1/4s were quoted at 4.08% bid, 4.01% offered; Pennsylvania Tans 5s were quoted at 4.20% bid, 4.10% offered; and New York State Trans were quoted at 2.90% bid, 2.85% offered.