Bond prices were quoted up 1/4 point in light trading Wednesday in a shortened holiday eve session.

The tax-exempt market opened with a slightly better tone, after posting some gains the previous day, but action was slow ahead of the Thanksgiving Day break.

Several economic reports came in as expected and had little effect on prices

Initial state unemployment insurance claims rose 1,000 to a seasonally adjusted 339,000 in the Week ended Nov. 20. New orders for durable goods grew 2.0% in October to a seasonally adjusted $ 1 35.8 billion, the highest level on record

Traders reported several small bid lists circulating in the secondary on Wednesday, but action was dull and the futures markets closed at 1 p.m., eastern time.

Before the close, however, Treasury bond prices trekked higher and then faded back to near unchanged by early afternoon.

By session's end, tax-exempt prices were quoted 1/4 point higher overall, but some bonds were said to pop 3/8 to 1/2 point.

In secondary dollar bond trading, Massachusetts Water Authority 51/4s of 2020 were quoted at 5.7801 bid, 5.76% offered; New York City 51/4s of 2014 were at 6.08% bid, 6.03% offered; and Chicago O'Hare MBIA 5s of 2018 were 5.65% bid, 5.63% offered.

In the debt futures market, the December municipal contract closed down 3/32 at 101.18, when the Treasury market rejected the gains posted earlier in the day. The retracing was another indication of the tax-exempt market's inability to decouple from Treasuries.

Reflecting the better bid for bonds, The Blue List of dealer inventory fell $47.4 million Wednesday, to $1.77 billion.

Several traders said the improvement last week could extend into this week. The said traditional buyers, who have all but abandoned the market for more than a month, may finally be forced to put their cash back to work.

"The market has had a huge correction" said a trader at a large bond firm based in New York. "Customers have more money than they've let on and they're going to buy deals and surprise everybody. We're not wildly bullish, but a couple of points wouldn't be too far flung."

More skeptical market players warned, however, that the fate of the tax-exempt market lies with Treasuries.

"People haven't a clue without the help of the government market," one trader said. "If it fails, we could see another big drop."

This week, the markets face a slew of economic indicators, which have been the other archenemy of bond prices over the past month. October existing home sales will be released today, followed by the Chicago Purchasing Management survey and consumer confidence data tomorrow.

On Wednesday, the National Purchasing Managers report is due out, along with the first revision of third-quarter gross national product and October construction spending. Thursday, new home sales and personal income figures will be released, followed on Friday by the November employment report, factory orders and leading indicators.

Looking ahead to supply, The Bond Buyer calculated 30-day visible supply on Wednesday at $5.38 billion, up $671 million from Tuesday.

Several market observers are calling for new supply to dwindle, forcing more demand for fewer bonds. "We remain convinced that as new issue volume continues to decline and as individuals begin to feel the bite of the new higher marginal tax rates, municipal bonds will appreciate relative to Treasury securities," wrote Michael Craft of Lehman Brothers' municipal strategies group in the firm's most recent newsletter.

The Bond Buyer on Wednesday calculated this week's new bond and note deals at $5.6 billion.

The negotiated sector contains several sizable offerings, including $700 million San Jose Redevelopment Agency, California tax allocation bonds, to be priced by Merrill Lynch & Co.; and $143 million Battery Park City Authority, N.Y., junior revenue refunding bonds, to be priced by Bear. Stearns & Co.

Also of note in the negotiated arena this week are $80 million Forsyth, Mont., pollution control revenue refunding bonds, to be priced by Goldman, Sachs & Co.; and $125 million Texas Water Development Board senior lien revenue bonds, also slated for pricing by Goldman, Sachs.

The competitive calendar is dominated by Wednesday's bidding for $215 million Los Angeles Community Redevelopment Agency refunding bonds, and tomorrow's sale of $120 million Ohio Public Facility Commission revenue bonds.

The short-term sector features Wednesday's sale of $1.3 billion New Jersey alternative tax and revenue anticipation notes.

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