Friday's employment report offered the bond markets no solace, and fears rose exponentially with the continued erosion in prices, traders said.
Non-farm jobs increased 177,000 in October led by gains in the service sector, while manufacturing employment stabilized. The report was in line with the market's most sober expectations and so, with no white knight in sight, sellers again held the reins, driving tax-exempt prices down. Traders said buyers appeared late in the day, but prices were still quoted down 1/4 to 1/2 point.
In secondary dollar bond trading, TBTA 5s of 2020 were quoted at 93-1/2 to yield 5.50%; Pittsburgh Water and Sewer FGIC 43/4s of 2016 were quoted 5.51% bid, 5.49% offered; Florida Board of Education 5 1/8s of 2022 were at 93 3/4-94 1/4 to yield 5.56%; and Los Angeles DEWAP 5.40s of 2031 were 5.69% bid, 5.67% offered.
In the debt futures market, the December municipal contract settled down 6/32 tO 101.09. The MOB spread narrowed to negative 452 from negative 460 on Thursday.
Friday's drop marked the tenth consecutive down-day in direct response to stronger than expected economic indicators. Municipals have also suffered from oversupply and a pronounced lack of buyers. Traders reported a very weak bid side Friday, with little liquidity in the market.
"The market is paranoid after all these losses," a trader said late in the day. "it doesn't know which way to go. It's riddled with fear."
Players who chose to put a constructive turn on events noted that there were some buyers of bonds on Friday and that the cheap levels could spark more interest.
"There are a couple of people on the right side of this trade and they could act as a white knight if we get good inflation numbers," a trader said. "We need somebody to come in here and take advantage of this weakness."
On the horizon this week are inflation data, the next important economic signal for the market. Inflation has proved to be in check over the past several months. More evidence to that end could give the market the confidence it needs to rally from oversold levels, traders said.
Directly in the market's favor, upcoming supply has tapered off from the heavier levels seen over the past two months. That could help dealers mend their wounded positions.
The Bond Buyer calculated 30-day visible supply Friday at $5.42 billion. The Blue List of dealer inventory continued to expand, rising $24 million, to $1.98 billion Friday. Reflecting the lack of buyer interest recently, the list has averaged $2.01 billion in the first week of November and $1.83 billion in October. That followed a September average of $1.45 billion. Year to date, the list averaged $1.57 billion, compared to $1.36 billion in 1992.
Just under $4 billion of new issues is expected to be priced this week, according to figures tabulated by The Bond Buyer Friday.
The negotiated calendar contains several sizable offerings, including $750 million New York City Municipal Water Finance Authority water and sewer refunding revenue bonds, to.be priced by Smith Barney Shearson; $200 million California Pollution Control Finance Authority revenue bonds, to be priced Goldman, Sachs & Co.; and $115 million Illinois Health Facility Authority hospital revenue, to be negotiated through a Goldman Sachs syndicate.
The competitive calendar features only two big deals: $326 million Washington Suburban Sanitary Commission refunding bonds, scheduled for sale on Wednesday, and $310 million Los Angeles Co. Metropolitan Transportation Authority revenue bonds, also slated for sale Wednesday.