New-issue calendars in the municipal and corporate areas were heavy last week, but activity in the secondary trading markets was practically at a standstill especially in the corporate market. For the third week in a row, announcement of unexpectedly lower monetary aggregates gave the sagging bond markets a lift.
New corporate issues ran the gamut in quality and yield last week. The double-A-rated Houston Lighting and Power Co. returned 9.30 percent, while the single-B-rated Kay Corp. was priced with a 13 1/2 percent coupon and offered at par. Should interest rates continue to move higher, more new issues will be offered with greater call protection, or with sinking funds (as in the case of the Detroit Edison preferred stock that returned 9.72 percent last week) to entice investors.
This week, two Ford Credit issues and the Mountain States Telephone issue will be the last large corporate offering until 1979.
The muicipal market also saw many high-yield items marketed. The BAA Dallas-Fort Worth Airport revenue issue returned 7.29 percent in the term bonds, while several housing authority issues returned between 6.70 and 7.60 percent on their term bonds.
This week's tax-exempt slate will be sizable. Several state general obligations will be offered, from the triple-A Californias to the A-1-rated State of Alaska.
The yield spread between one-year 30-year prime general obligations has narrowed to 70 basis points. Therefore, the historical spread favors the short maturity. Putting it another way, during the past 12 months, the 30-year bond would offer 173 basis points more return on average than the one-year. Today only 70 basis points more yield can be obtained for making the same extension.
The New Jersey Sports Complex authority is offering two sizable quality issues tomorrow. A $303 million refunding issue guaranteed by the state and rated triple A, plus a $73 million revenue issue which is rated double A. The sports complex has been most successful, and these bonds could be attractive if they are priced right.