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: Thu, 5 Nov 92 12:43:43 EST Message-ID: <4.1992Nov5.124344@AmeriCast.com> 11/5/92 TITLE Credit Market Bonds Drop As Focus Is Shifted To Jobs Data, Treasury Auction Phil Hawkins NEW YORK - Market prices eased slightly yesterday while participants assessed Tuesday's election results and awaited an important economic indicator tomorrow as well as the $37 billion new Treasury sale next week. Among bellwether issues, the 71/4% Treasury bond of 2022 declined by about 3/8 point, or $3.75 for each $1,000 face amount, to a price of around 95, where the yield was approximately 7.68%. It now has fallen 53/8 points -$53.75 per $1,000 - below its six-year peak on Sept. 8 of 1003/8, to yield 7.22%. Two recent new Treasury notes also slumped further beneath their original prices in sales totaling $25.75 billion last week. They initially involved $15 billion of two-year 41/4% notes yielding 4.37% and $10.75 billion of five-year 53/4% notes yielding 5.84%. Their yields since have climbed to about 4.42% and 5.93%, respec- tively. Three new issues will be offered next week by the Treasury to redeem $23.1 billion of maturing old debt and to raise $13.9 billion of fresh cash. They comprise $15.5 billion of three-year notes on Monday, $11.25 billion of 10-year 63/8% notes on Tuesday and $10.25 billion of 30-year bonds on Thursday. The yields by those three new obligations in advance when-issued trading were about 5.05% for three years, 6.90% for 10 years and 7.65% for 30 years. The short notes will require a purchase of at least $5,000, whereas both the long notes and bonds will be available in minimum denominations of $1,000. One new corporate sale got under way yesterday despite the jittery investment set- ting. Wells Fargo & Co. began to sell $150 million of two-year floating rates notes priced at 100 and paying interest at one percentage point above the London interbank lending rate. Its notes, rated Baa-1 by Moody's and A- by Standard & Poor's, were distributed through underwriters led by Lehman Brothers Inc. Conversely, Treasury bills posted small price gains in the latest session. They were buoyed by lingering hopes of another official lowering of nearby short-term interest rates in an easing of basic monetary and credit policy by the Federal Reserve. Bill prices inched up whereby the discount rates were shaved by about 0.02 percentage point to 3.01% for three months, 3.22% for six months and 3.39% for one year.. The three rates would be equivalent to bond yields over these respective maturities of about 3.06%, 3.30% and 3.50%. A weekly auction is planned next Monday by the Treasury of $23.6 billion in equal portions of new three-month and six-month bills, both requiring a minimum order of $10,000. A monthly sale of new one- year bills will be con- ducted on Nov. 17. The Fed's future policy stance may be influ- enced by the October employment report being released early to- morrow. "If employment advances 50,000 or more the Fed probably would hold (policy) steady, but another drop (in jobs) almost certainly would prompt the Fed to ease again," suggested Dana Johnson, an economist at First National Bank of Chicago. Federal funds traded between about 27/8% and 3 1/16% after averaging 3.08% on Tuesday. The Fed, which currently desires this benchmark rate on overnight interbank loans at about 3%, indirectly sup- plied a substantial $3 billion of additional funds temporarily. Tax-exempt bonds provided an early test of the possible market impact from the change in government leadership decided by voters on Tuesday. They are the logical vehicle for financing large in- frastructure improvements deemed important for creating new jobs by President Elect Bill Clinton but also a possible source of ad- ditional tax revenue by incoming Congressional members. Clinton was lauded as being "particularly aware and supportive of the role of municipal bonds in providing cost-effective funds for repairing and rebuilding infrastructure" by the Public Securities Association, a market trade group. And municipals were touted as "the buy of the quarter" by one well-known mutual bond fund. Not everyone agreed, however. A respected institutional investor was believed to quietly have begun liquidating more than $100 million in state and local government securities holdings early yester- day. He wouldn't comment on his current investment strategy but did say he "wouldn't be surprised by increased efforts in Congress to further limit the tax-exempt status of municipal bonds." Moody's Yield Issue Rating Bid AskChg% Nor St Pwr 57/8 1997 Aa-2 981/8 983/8 -1/8 6.23 Dig Equip 71/8 2002 A-2 957/8 961/8 -1/8 7.74 Du Pont 63/4 2002 Aa-2 953/4 96 -1/4 7.33 News Amer 91/8 1999 Ba-2 981/2 99 +1/4 9.13 Fruit Loom 77/8 1999 B-1 981/4 983/4 +1/4 8.18 Aztar 11 2002 B-2 99 991/2 +1/4 11.08 Penn Traff 103/8 2004 Ba-3 99 991/2 +1/4 10.43 Fr- McMor 6.55 2001 Ba-3 88 89 - 1 Conv Home Dep 41/2 1997 A-2 129 131 Unch Conv Mead 63/4 2012 Baa-1 981/2 991/2 Unch Conv Br-Ferr 61/4 2012 A-3 94 95 Unch Conv IBM 77/8 2004 Aa-1 1011/2 1021/2 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