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: Tue, 27 Oct 92 16:00:26 EST Message-ID: <9.1992Oct27.160026@AmeriCast.com> 10/27/92 TITLE Credit Market Bond Prices Continue To Recede; IBM Begins A $1.65 Bil Offering Phil Hawkins NEW YORK - Market prices continued to erode yesterday as partici- pants waited cautiously for several large new Treasury sales and the national election. For example, the bellwether 71/4% Treasury bond of 2022 declined by about 1/4 point, or $2.50 for each $1,000 face amount, to a price of around 951/8, where the yield was approximately 7.66%. It had lost 11/2 points last week. The 71/4% bond now is about 51/4 points - $52.50 per $1,000 - below its notable high on Sept. 8 of 1003/8, to yield 7.22%, the best closing level by such bonds in about six years. Two new note sales totaling $25.75 billion are scheduled this week by the Treasury. They comprise $15 billion of two-year notes in minimum denominations of $5,000 today and $10.75 billion of five-year notes in minimums of $1,000 tomorrow. Those new notes were yielding about 4.42% and 5.92%, respective- ly, in advance when-issued trading yesterday. In addition, a new quarterly refunding sale will be conducted early next month by the Treasury. It might contain about $37 billion of three-year notes, 10-year notes and 30-year bonds to be offered in the week beginning Nov. 9. Another federal agency plans a four-part new sale of about $2.8 billion tomorrow. The Federal Farm Credit Banks Funding Corp. will offer $1.44 billion of three-month bonds, $760 million of six-month bonds, $410 million of one-year bonds and $175 million of four-year bonds. International Busi- ness Machines Corp. launched a two-part offering of $1.65 billion yesterday. It began to sell $900 million of five-year 63/8% notes and $750 million of 10-year 71/4% notes through underwriters managed by First Boston Corp. IBM's new debt obligations were rated Aa-2 by Moody's and AAA by Standard & Poor's. It will use the sale proceeds to help redeem about $1.71 billion in existing notes and convertible debentures. Its lower interest cost on the new issue will reduce annual payments by about $29 million, a spokesman said. CIT Group Holdings Inc. also offered $100 mil- lion of three-year 51/2% notes at a price of 99.746, to yield 5.593%, which was about 0.65 percentage point above the return by Treasury securities of similar maturity. Its notes, rated A-1 and A+, were distributed by a Morgan Stanley & Co. syndicate. Treasury bills and other money market instruments turned in a mixed performance yesterday. The weekly auction of $23.6 billion in new bills again produced the highest interest rates since the sale on Aug. 31. New three-month bills furnished an average discount rate of 2.97%, up from 2.94% last week. The 2.97% rate resulted from an average price of 99.249 and would be equivalent to a bond yield over three months of 3.04%. The average discount rate on new six-month bills rose to 3.22% from 3.10% a week ear- lier. The 3.22% rate was set by an average price of 98.372 and would be the same as a bond yield over six months of 3.32%. Pur- chase orders at yesterday's auction totaled $39.6 billion for the three-month bills and $35.44 billion for the six-month bills. These included respective portions of about $1.14 billion and $690 million from individuals and other small investors. Federal funds tightened to between about 3% and 3 3/16% from an average of 2.90% on Friday. The Federal Reserve, which currently desires this basic rate on overnight interbank loans at about 3%, directly supplied additional funds for three days. Market ac- tivity continued to be restrained by concerns about next week's election. "Bond markets have tried to adjust to a Clinton victo- ry over the past several weeks, selling off on undefined fears that a Democratic win would translate automatically into higher budget deficits and higher inflation," noted Susan Hering, a senior economist at Salomon Brothers Inc. "In the likely event of a Clinton victory, bonds will remain vulnerable until any shift in fiscal policy is clarified," Hering cautioned. "That process easily could stretch into spring, when a new budget will be proposed." Nor St Pwr 57/8 1997 Aa-2 98 981/4 -1/8 6.28 Dig Equip 71/8 2002 A-2 953/4 96 -1/8 7.81 Du Pont 63/4 2002 Aa-2 951/2 96 -1/8 7.38 News Amer 91/8 1999 Ba-2 967/8 971/2 Unch 9.35 Fruit Loom 77/8 1999 B-1 963/4 971/4 Unch 8.41 Aztar 11 2002 B-2 971/2 98 Unch 11.31 Penn Traff 103/8 2004 Ba-3 97 971/2 Unch 10.65 Fr-McMor 6.55 2001 Ba-3 90 911/2 -1/2 Conv Home Dep 41/2 1997 A-2 1261/2 1271/2 Unch Conv Mead 63/4 2012 Baa-1 961/2 98 Unch Conv Br-Ferr 61/4 2012 A-3 93 94 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