Municipal bonds easily overcame initial inflation jitters yesterday and renewed their orderly march higher.
The producer price index for finished goods was unchanged in November, bringing the yearly wholesale inflation rate to 0.03%, the Labor Department reported. But bonds were pestered by a 0.4% rise in the core rate. Traders quickly decided the rise was an aberration and the market regained confidence and began to make gains. Investors have pushed bond prices higher all week, snapping up secondary bonds and new deals.
Demand was strong enough to push yields on all four of The Bond Buyer's indexes down significantly, including an 18-basis-point drop in the revenue bond index.
Traders reported light to moderate action, as the market was somewhat subdued ahead of today's consumer price report. The primary sector was the main focus as there are fewer bonds around in the secondary, traders said. By session's end, cash prices were quoted up 3/8 to 1/2 point to average, although discounts were even higher.
In late secondary dollar bond trading, San Jose 5s of 2020 were quoted at 5.36% bid, 5.34% offered; Orange and Orlando FGIC 5 1/8s of 2020 were quoted 5.32% bid, 5.30% offered; and Florida Board of Eduction 5 1/8s of 2022 were at 97 5/8-7/8 to yield 5.28%.
In debt futures, the March municipal contract bounced around, hitting a low of 103.04 and a high of 103.27, beforec settling up 6/32 at 103.17. The MOB spread widened to negative 411 from negative 409 on Wednesday.
Away from the secondary market, underwriters were able to raise prices on new offerings, thanks to continued strong investor demand.
Bear, Stearns & Co. priced and repriced $210 million Wisconsin general obligation refunding bonds.
At the repricing, Series 4 yields were lowered by 30 basis points for bonds due May 1, 1994, by 15 basis points for bonds due Nov. 1, 1994, and by five basis points from 1996 through 2003. Series 5 yields were lowered by 10 basis points in 1994 and by five basis points from 1998 through 2006 and in 2010.
The final offering included $76 million Series 4 capital improvement bonds, priced to yield from 2.00% in 1994 to 4.80% in 2006. The remaining $134 million Series 5 veterans housing bonds were priced to yield from 2.50% in 1994 to 5.00% in 2006. A 2010 term was priced with a coupon of 5.20% to yield 5.30%; a 2013 term was priced as 5.30s to yield 5.40%; a 2016 term was priced as 5.35s to return 5.45% and a 2023 term was priced as 5.40s to yield 5.50%.
The managers said they expected the bonds to be rated double-A by Moody's Investors Service and by Standard & Poor's Corp.
Elsewhere, Morgan Stanley & co. pricedc $143 million Massachusetts Health and Higher Educational Facilities Authority revenue bonds for the New England Medical Center Hospitals.
Serial bonds were pricedc to yield from 3.60% in 1996 to 5.20% in 2008. A 2024 term, containing $42 million of the loan, was priced as 5 3/8s to yield 5.45%.
There also were $24 million structured yield curve notes, $18 million auction rate notes, and $18 million yield curved notes, all of which were not formally reoffered.
The bonds are insured by Municipal Bond Investors Assurance Corp. and rated triple-A by Moody's and Standard & Poor's.
Goldman, Sachs & Co. priced and repriced $102 million Chicago, Ill., gas supply revenue bonds for the People Gas Light and Coke Co. project, subject to the federal alternative minimum tax.
At the repricing, variable rate bond yields were lowered by five basis points.
The final offering included $75 million Series A fixed rate bonds priced at par to yield 5.75% in 2023. The remaining $27 million Series B bonds were priced as variable rate securities at par to yield 2.55% in 2023.
The managers said they expected Moody's to rate the issue Aa3. Standard & Poor's rated the fixed rate bonds AA-minus and the variable rates A-1-plus/AA-minus.
In light competitive action, $190 million California Department of Water Resources Central Valley project water system revenue bonds were won by Goldman, Sachs & Co. with a true interest cost of 5.2043%.
The firm reported all bonds sold by the end of the trading day.
Serial bonds were reoffered to investors at yields ranging from 3.10% in 1995 to 4.95% in 2008. Bonds from 2009 through 2016 and term bonds in 2019 and 2024 were not formally reoffered. Ac 2027 term, containing $35 million, was reoffered as 4 7/8s to yield approximately 5.30%.
The issue is rated double-A by Moody's and Standard & Poor's.