in the primary market, Wisconsin and the Los Angeles Harbor Department waded in with sizable competitive deals.
Bidding was tight for Wisconsin's $231 million of general obligation bonds, according to Frank R. Hoadley, the state's capital finance director.
CS First Boston's winning bid had a true interest cost of 6.0082%, while runner-up Morgan Stanley & Co.'s cover bid had a TIC of 6.0085%. Hoadley added that all of the bids were within 2.5 basis points of each other. The other bidders were Merrill Lynch & Co.; Donaldson, Lufkin & Jenrette Securities Corp.; and Goldman, Sachs & Co.
"All of the accounts had strong institutional interest in the long end of the transaction, so that's one of the reasons that the bid was so close," Hoadley said. "But the overall price level is really quite satisfactory to us also - It's a good strong price for Wisconsin."
Wisconsin actually fared a little bit better than Hoadley had expected, and he cited a "positive underlying market tone" as the reason.
"I think that there have not been a lot of bonds offered in the last month, and, in addition to that, the market is holding in fairly strongly right now," Hoadley said.
Hoadley added that none of yesterday's bidders chose to place their bids through an electronic bidding system. Yesterday was the first time Wisconsin used the system, he said, which is called the Parity Bidding System for Municipal Bonds. Earlier, Hoadley said Wisconsin made the system available to help reduce some of the problems bidding groups face in having to deliver a bid in person.
The finance director said yesterday marked the first time such a service was offered for a sizable municipal offering. And while no takers emerged, the system did generate some discussion.
"I know that some of the old hands on the Street say, yeah, this is something that's got to be fixed," Hoadley said. "And so I expect to see an electronic system that will be pretty active for bonds like this in the near future."
First Boston reoffered the bonds to investors at yields ranging from 5.20% in 1998 to 6.00% in 2008. Bonds in 1996 and 1997 and from 2009 to 2015 were not formally reoffered to investors, a source familiar with the deal said. Moody's Investors Service and Standard & Poor's Corp. rate the offering double-A.
The source said $65 million of the bonds, concentrated from 1998 to 2004, remained by late yesterday afternoon. Aside from a small amount in dealer stock, most of the bonds from 10 years on out were placed with investors, including property and casualty funds and mutual funds.
The source said he expected to see less interest in the shorter maturities, partly because of concern over what the Federal Reserve will do next.
Also yesterday, a Bear, Stearns & Co. group won $200 million Los Angeles Harbor Department of California revenue bonds with a 6.596% TIC. First Boston had the cover bid with a 6.606% TIC. The deal consisted of $20 million Series A bonds and $180 million Series B bonds. The Series B bonds are subject to the alternative minimum tax. A balance of $40 million, all confined to the AMT portion, was reported near day's end.
The Series A piece was reoffered to investors at a top yield of 6.55% in 2025, while the series B piece was reoffered at a top yield of 6.722% in 2025.
A source familiar with the deal said the offering was well received, with interest coming from "a combination of property and casualty, money managers, individuals, and some fund business."
In secondary market action yesterday, high-grade issues were up three basis points overall, but a municipal analyst said there was a "split" within that market. While maturities from one through seven years weakened by five to 10 basis points, longer high-grade issues improved by nearly five basis points. The analyst said the split was evidence of "a tightening of the slope of the municipal yield curve."
In the dollar bond market, prices moved up #1/4 point, he said. Overall, the analyst attributed yesterday's gains to a lack of municipal supply.
In the government market, the 30-year bond closed down #1/32, to yield 7.76%. In debt futures, the March municipal contract closed up #3/32, to settle at 86#16/32. Yesterday's March MOB spread was negative 443, compared to negative 444 on Tuesday.
The 30-day visible supply of municipal bonds yesterday totaled $3.35 billion, up $297 million from Tuesday. That comprised $1.66 billion of competitive bonds, up $46.3 million from Tuesday, and $1.684 billion of negotiated bonds, up $251 million.
Standard & Poor's Corp.'s Blue List of municipal bonds was down $15.9 million yesterday, to $1.232 billion.
