Investors swept up more than $1 billion attractively priced New York City securities yesterday and the secondary remained firm as demand for bonds continued to be strong.
In fact, demand was strong enough for the city deal that senior manager Bear, Stearns & Co. was able to lower interest rates throughout the loan by as much as 13 basis points.
"We saw more interest than we expected in the 2005 through 2014 range and we had a real who's who of buyers," said Daniel L. Keating, managing director of the municipal securities group at Bear, Stearns. "If you look at it we had pretty strong demand for unenhanced bonds as well."
The final scale included insured serial bonds priced to yield from 5.00% in 1995 to 6.68% in 2015. A 1993 serial is uninsured and priced at par to yield 5.10%, while remaining uninsured bonds were priced to yield from 7.70% in 2016 to 7.75% in 2021.
Bonds from 1995-2001, 2006-2008, and 2012-2014 are insured by the Municipal Bond Investors Assurance Corp. Bonds from 2002-2005 and 2015 are insured by AMBAC Indemnity Corp. and bonds in 2009, 2010 and, 2011 are backed by FSA insurance.
Insured bonds are rated triple-A by both Moody's Investors Service and Standard & Poor's Corp., except for the FSA bonds, which are only rated by Standard & Poor's. The uninsured bonds are rated Baal by Moody's and A-minus by Standard & Poor's.
The city's issue also included $203.2 million of daily variable-rate securities, which a short-term desk officer said were drawing strong demand despite a low yield of 2.50%.
The source said the variable-rate notes were "heavily oversubscribed" because money market funds find themselves scrambling to stash yearend cash infusions. The securities carry top ratings based on backing from letters of credit.
In other negotiated new issue action Goldman, Sachs & Co. tentatively priced $143 million California Educational Facilities Authority revenue bonds for Stanford University.
The offering included serial bonds priced to yield from 4.60% in 1994 to 6.25% in 2005. A 2009 term was priced as 6 1/4s to yield 6.50% and a 2016 term was priced as 6s to yield 6.54%.
The bonds are rated triple-A by both Moody's and Standard & Poor's.
Cain Brothers, Shattuck & Co. as senior manager tentatively priced and repriced $114 million Philadelphia Hospitals and Higher Education Facilities Authority hospital revenue bonds for the Graduate Health System Obligated Group to lower some term bond yields by about two basis points.
The final pricing included serial bonds reoffered to investors at yields ranging from 5.90% in 1994 to 7.20% in 2001. A 2005 term was priced to yield 7.30%, a 2010 term was priced to yield 7.41%, a 2018 term was priced to yield 7.46%, and a 2021 term was priced to yield 7.40%.
The issue is rated Baal by Moody's and A-minus by Standard & Poor's.
In the secondary yesterday, traders reported a firm tone, despite price fluctuations in the government market as the Street looks for an ease in monetary policy by the Federal Reserve Board.
Prices were unchanged to up 1/4 in spots by session's end. Reflecting strong demand, high-grade bank-qualified bond yields have fallen about 20 basis points through seven-year maturities over the last three trading sessions.
"The firm tone is still there," one trader acknowledged. "Most people are bullish and that doesn't seem to want to change."
In the debt futures market, the March contract settled down 4/32 to 95.04. The March MOB spread was calculated at negative 187.
The market has thinned out after several months of record supply. The Bond Buyer's 30-day visible supply tumbled to $1.9 billion yesterday, while The Blue List of dealer inventory slipped to $1.3 billion.
Activity was brisk during the morning session, but tapered off during the afternoon. Bid-wanteds were numerous as market participants square up their positions ahead of the new year.
"A lot of people are putting stuff out for the bid, but they're not too eager to pick stuff up," said a Chicago-based trader. "People have done really well this year and they don't want to back themselves into a corner. We just want to be cautious and enjoy the holiday."
In secondary dollar bond trading, Denver Airport 7 3/4s of 2021 were quoted at 97 1/2-3/4 to yield 7.95%, Port Authority of New York and New Jersey 61/2s of 2021 were quoted at 96 3/4-97 to yield approximately 6.72%, and New Jersey Turnpike Authority 6 1/2s of 2016 were quoted at 99 3/8-1/2 to yield 6.54%.
In the short-term tax-free market, traders were "jockeying around, getting ready for yearend, and preparing themselves for the usual pressures that are brought to bear," one municipal money market executive said yesterday.
A municipal note trader complained of a dearth of paper in what has become a vicious seller's market. "We keep improving our bid and yet we keep missing," the trader said.
Early in the session, top-rated municipal paper was quoted at 3.35%-3.25%, although there were few if any notes out for bids. Late in the day sources said March MIG-1 California notes were being offered at 3.30%, June California notes at 3.25%.
New York State Trans were changing hands at a 4.85%-4.75% bid-offered spread, but the spread narrowed to 4.80%-4.75% by late in the day. New York City Tans were trading at 4.10%-3.95%, while city Rans were offered at 5.00% late in the session.