Agenda - Council - 05/14/1979 - Laserfiche WebLink

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May, 1979 MARKET MUSINGS Over the past three months the tax exffmpt market has remained amazingly stable. The Bond Buyer Index registered 6.26% on April 2~; as compared to ~;.30% on January 2~. This seems to have he~ for the other markets as well, which is somewhat surprising in light of the gloomy economic reports of the same period. Alas, three months do not a year make... WHAT DOES IT ALL MEAN? We often refer to various indices to explain what is happening in the bond market and why it is happening. Included on the back of the S-I Letter are the "Bond Buyer Index" and the "Placement Ratio", as examples. The Bond Buyer Index is compiled by the Daily Bond Buyer, a trade newspaper published daily in New York City. :Fhe paper was founded in 1891 and has been publishing its Index for more than 60 years. The most common index used is the 20 Bond Index comprised of 20 different issuers; 10 states, 2 counties, 7 cities and Puerto Rico. Further, the 20 issuers include a mix of ratings: 4 Aaa credits, 7 Aa credits, 4 A-I credits, 3 A credits, I Baa-I credit and I B credit. Each Thursday at the end of trading (about 3:00 E.S.T.) a sampling is taken of the market value of these securities for an approximate 20-year maturity and the composite average then becomes the Index. An II Bond Index is also published, reflecting only the II highest grade bonds, the Aaa's and Aa's. The record Iow 20 Bond Index was 1.29% on February I z t, 1946. The record high, as most of us remember, was on October 2, 1975 when it reached 7.67%. At the same time each week the Bond Buyer also compiles the placement ratio. This represents the amount of bonds distributed as a percentage of the total new issues of over $1,000,000 sold each week. This indicates how well the bonds were received by investors at the yields offered. If the placement ratio is high it indicates that the bonds were well received at the prices offered and the yields will probably be adjusted downward until investor resistance is met. On the other hand, if the ratio is Iow (below 80% is regarded as low), the yields will be adjusted upward to attract buyer interest. Two other indicators are also widely used in the bond trade. One is the "Blue List", a daily compilation of all bonds advertised for sale on the secondary market. These are old issues being reoffered and a level of about $800 million is considered normal. The other is the "30-Day Visible Supply" which compiles the total dollar SPRINGSTED INCORPORATED PUP LiO FiNANOE ,¢,,(}() ( )~;I~(')FII,J i¢lJll Dli,!Q :~,AII',IT PAUL', MII',INESOqA 55102