Path: bloom-picayune.mit.edu!snorkelwacker.mit.edu!americast.com!americast.com!americast-post Newsgroups: americast.ibd From: americast-post@AmeriCast.Com Organization: American Cybercasting Approved: americast-post@AmeriCast.com Subject: Credit Market Date: Mon, 23 Nov 92 12:15:13 EST Message-ID: <2.1992Nov23.121514@AmeriCast.com> 11/23/92 TITLE Credit Market #m#gm#m#New T-Bills Are Likely To Jostle Market Early In Upcoming Week Phil Hawkins NEW YORK - The market is likely to remain volatile due to another huge new Treasury supply this week as well as con- tinuing economic and political uncertainties. Fixed-income is- sues again fluctuated to end narrowly mixed Friday. The key 75/8% Treasury bond of 2022 rose by about 1/4 point, or $2.50 for each $1,000 face amount, to a price of around 1011/8, where the yield was approximately 7.53%. It originally was priced at 99.59, to yield 7.66%, in the recent $10.3 billion sale. Two new note sales totaling $25.75 billion will be conducted ear- ly this week by the Treasury. They comprise $15 billion of two- year notes in minimum denominations of $5,000 Monday and $10.75 billion of five-year notes in minimums of $1,000 on Tuesday. Those pending notes were yielding about 4.70% for two years and 6.10% for five years in advance trading late Friday. Another federal agency commenced a two-part new sale of $130 million on Friday. The Federal Farm Credit Banks Funding Corp. offered $65 million of three-year step-up notes paying interest at 4.60% for the first year and at 5.90% thereafter, plus $65 million of five- year step-up notes paying 5.375% for the first two years and 7.25% thereafter. Merrill Lynch Capital Markets also launched two separate new sales. It offered $200 million of three-year 57/8% notes at a price of 99.796, to yield 5.95%, which was about 0.80 percentage point above the return by Treasury securities of comparable matu- rity. In addition, Merrill Lynch began to sell $219 million of one-year 3.90% notes priced at 100 and $693 million of five-year 51/2% notes yielding 5.62%. Its $912 million of notes are backed by auto loan receivables purchased from Chrysler Corp. Treasury bills and other money market instruments generally sustained small losses in the latest session. Bill prices were trimmed so as to boost the discount rates by about 0.03 or 0.04 percentage point to 3.20% for three months and 3.40% for six months. The two rates would be equivalent to bond yields over these respective maturities of about 3.27% and 3.51% A weekly auction is planned on Monday by the Treasury of $23.6 billion in equal amounts of new three-month and six-month bills, the same as in recent weeks. A minimum purchase of $10,000 is required for both new bills. A three-part offering of $2.71 billion in new short-term bonds is slated on Wednesday by the Federal Farm Credit Banks Funding Corp. It contains about $1.44 billion of three-month bonds, $900 million of six-month bonds and $374 million of one-year bonds. "The shorter maturities have borne the brunt of the market pull- back," noted Suresh Krishnan, senior fixed-income market strateg- ist at Merrill Lynch. "The fundamental question facing portfolio managers and traders alike is the yield curve. "Since bottoming on Oct. 5, Treasury yields have risen dramatically," Krishnan ob- served. "Three-month and six-month yields have risen 0.53 and 0.58 percentage point, respectively, while two-year and three- year yields have risen 0.88 percentage point and 1.01 percentage points. By contrast, the long bond yield is up only 0.18 percen- tage points. "The net result has been a marked flattening of the yield curve," the Merrill Lynch analyst said. The spread between 30-year and two-year Treasuries peaked on Oct. 5 at 3.66 percen- tage points, then shrank to a low of 2.90 percentage points by early last week. "By many measures of relative value, the two- year to five-year Treasury sector looks attractive," Krishnan suggested. "Year-end pressures, along with the unwinding of curve steepening trades and the establishment of curve flattening trades, are contributing to the cheapness of the intermediate- term sector. Further near-term weakness may be expected; we recommend buying the sector on that weakness." Moody's Yield Issue Rating Bid AskChg% Nor St Pwr 57/8 1997 Aa-2 981/4 981/2 +1/8 6.17 Dig Equip 71/8 2002 A-2 953/4 96 Unch 7.75 Du Pont 63/4 2002 Aa-2 96 961/4 Unch 7.28 News Amer 91/8 1999 Ba-2 100 1001/2 -1/4 9.04 Fruit Loom 77/8 1999 B-1 993/4 1001/4 -1/4 7.83 Multicare 13 2002 B-3 973/4 981/4 -1/4 12.73 Penn Traff 103/8 2004 Ba-3 1001/2 101 -1/4 10.21 Fr-McMor 6.55 2001 Ba-3 86 88 Unch Conv Home Dep 41/2 1997 A-2 132 133 Unch Conv Mead 63/4 2012 Baa-1 101 102 + 1 Conv Br-Ferr 61/4 2012 A-3 95 96 Unch Conv IBM 77/8 2004 Aa-1 1001/2 102 Unch Conv Conv - Convertible This article is copyright 1992 Investors Business Daily. Redis- tribution to other sites is not permitted except by arrangement with American Cybercasting Corporation. For more information, send-email to usa@AmeriCast.COM