Congress finally authorized an $80 billion debt-ceiling extension, which will run until Dec. 6. With that formality out of the way, the Treasury quickly unleashed a deluge of new-issue announcements. These offerings which began on Friday with the sale of $22 billion in cash management bills, looks like this:
On Monday, $14.8 billion of the regular 3- and 6-month T bills; Tuesday, $8.75 billion of 3-year notes; Wednesday, $9.5 billion of 2-year notes; Thursday, $7 billion of 10-year notes; Friday, $6.75 billion of 30-year bonds; Nov. 25, $14.8 billion of the regular 3- and 6-month T bills; Nov. 26, $9 billion in 52-week T bills, and Nov. 27, $7.5 billion in 5-year, 2-month notes.
This means that, over the next nine working days, $60.6 billion of T bills and $39.5 billion of coupon issues will have been marketed. The November refunding, consisting of the 3-year, 10-year and 30-year securities, is included in this week's offerings. The 3-year securities will come in minimum denominations of $5,000 and should return 8.90 percent, while the 10-year will come in $1,000 minimums and should return 9.85 percent, and the 30-year also will come in $1,000 minimums and should return 10.15 percent.
On Wednesday, the 2-year note will be auctioned, and will be issued in minimums of $5,000. It should return 8.65 percent. Because there are so many new issues coming in over the next two weeks, their returns will depend not only on the economic outlook, but especially upon the market's reception of each new issue.
As always, tenders must be received no later than 1:00 p.m. on the day of the sale at the Treasury in Washington or at any of the Federal Reserve Banks or their branches.
For those investors who might be looking to do tax swaps or who just might want to upgrade their portfolio, a couple of thoughts are offered:
*First, the yield spread between high-quality general obligation issues and good revenue bonds still is extremely wide: 50 to 75 basis points (a basis point is 1/100th of a percentage point). This is an area that should be exploited.
*Next, Charles T. Noona, the director of municipal research at the New York stock broker firm Rothschild Unterberg Towbn, has offered several names of issuers that he feels are either good-quality or improving situations. Among the states, Noona likes Michigan, California, Minnesota and Washington. For the cities, Dallas and Austin. In power authority names, Jacksonville Electric, Intermountain Power Agency, Nebraska Public Power District and Omaha Public Power District. In airport revenue bonds, he particularly likes the Phoenix Airports. Although new state issues are scarce, there are plenty of names here that may be used as replacements for any swaps.