Full text of H.16 Capital Market Developments : April 5, 1956
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I Not f o r Publication DECONTROLLED AFTER SIX MONTHS H.lii April 5, 1956 CAPITAL MARKET DEVELOPMENTS• The volume of publicly sold security issues was large l a s t week, p a r t i c u l a r l y "for corporate s e c u r i t i e s , and i s expected to be even l a r g e r t h i s week. During the week ending March 30, corporations sold l a r g e i s s u e s t o t a l i n g $>120 million, while S t a t e and l o c a l government f l o t a t i o n s amounted to $h'5 m i l l i o n . This week r i g h t s expire on two l a r g e corporate o f f e r i n g s t o t a l i n g $155 mill i o n and f i v e other issues with proceeds of $115 million are expected. S t a t e and l o c a l governments are scheduled to f l o a t l a r g e issues t o t a l i n g $19 m i l l i o n . April volume - The volume of corporate s e c u r i t y issues i s expected to continue to be heavy i n April. The April volume i s estimated at $800 million, somewhat smaller than t h a t of March but nearly two-thirds greater than t h e volume of the corresponding month l a s t y e a r . The volume of publicly offered issues i s unusually heavy, and includes expected l a r g e i s s u e s with proceeds of $380 million. State and l o c a l government bond issues during April are expected to t o t a l only $350 m i l l i o n , s l i g h t l y l e s s than the March volume and about o n e - f i f t h smaller than t h a t of April 1955* No very large issues are currently scheduled f o r o f f e r i n g . Bond y i e l d s - Yields on a l l types of long-term bonds rose l a s t week, r e f l e c t i n g in p a r t the heavy corporate new i s s u e volume, both actual and p o t e n t i a l , and the increase in r a t e s on bank loans to brokers and d e a l e r s . The increases ranged from 2 basis points' .on y i e l d s of corporate and State and l o c a l revenue bonds to 6 basis points on y i e l d s of to p - r a t e d State and l o c a l bonds. Daily data i n d i c a t e a sharp increase in U. S. Government . bond y i e l d s on Monday and Tuesday of t h i s week, but some decline on Wednesday. Corporate y i e l d s increased somewhat f u r t h e r . New securi t y issues r e f l e c t i n g the higher r a t e s reportedly have sold r a p i d l y . This i s in contrast to the recent experience when a number of large corporate and State and l o c a l government issues encountered considerable investor r e s i s t a n c e at t h e i r i n i t i a l o f f e r i n g y i e l d s . In a number of instances underwriting syndicates were dissolved with a considerable portion of the issue s t i l l unsold and r e o f f e r i n g y i e l d s increased sharply in an attempt to d i s t r i b u t e the remainder. As a r e s u l t of such price c u t t i n g , at t h e end of l a s t week dealers had made some progress in reducing t h e i r heavy inventory of municipal bonds. With the recent r i s e in new issue y i e l d s , the spread between y i e l d s on new i s s u e s and outstanding issues of similar term -2— and q u a l i t y has widened. The o f f e r i n g y i e l d on a new 30-year A-rated e l e c t r i c povrer u t i l i t y i s s u e sold on March 30 was 3*55 p e r c e n t , 30 b a s i s p o i n t s higher than t h a t of a s i m i l a r i s s u e o f f e r e d i n . l a t e Februaiy. The y i e l d on t h e new o f f e r i n g was 2£ b a s i s p o i n t s above t h e y i e l d on outstanding bonds of s i m i l a r term and q u a l i t y , while t h e Februaiy o f f e r i n g y i e l d was s l i g h t l y lovrer than y i e l d s p r e v a i l i n g on s i m i l a r outstanding bonds a t t h a t time. Stock p r i c e s - Common stock p r i c e s , as measured by the SEC index of 265 s t o c k s , declined s l i g h t l y during the week ending March 30. Trading volume continued heavy. Daily indexes i n d i c a t e some i n c r e a s e i n p r i c e s through Wednesday of t h i s week. More d e t a i l e d information concerning r e c e n t market d e v e l opments i s presented i n t h e attached e x h i b i t s . Business Finance and C a p i t a l Markets S e c t i o n , "Division of Research and S t a t i s t i c s , Board of Governors of t h e Federal Reserve System. EXHIBIT A H I G H - G R A D E BOND YIELDS W.ekly Per cent p e r : t\J ^ olD GOVERNMENT A a a j. 1953 1954 1955 u. s . Date Corporate Aaa 1 / long-term 2/ Old 1s e r i e s New s e r i e s 1956 Spread between S t a t e and U. S . Govt, l o c a l g o v t . ( o l d s e r i e s ) and Aaa 3 / C o r p o r a t e [ S t a t e and Aaa 1local Aaa (Per c e n t ) 1953 - High 1951 - High Low 1955 - High 1956 - High Low March 2 March 16 March 23 March 30 3-1*2 2.99 3.09 2.85 3.17 2.91 3-Hi 3.07 (6/19) (1/9) (1/8) (U/23) (12/23) (1/7) (3/30) (3/2) 3.07 3.08 3.10 1 3.12 3.1U 3.15 2.78 2.7k 2-1*1* 2.91 2.62 2.96 2.80 (6/6) n.a. (12/26) (1/9) (8/7) (8/5) 3.03 (8/5) ( 1 / 7 ) 2.89 ( 6 / 1 0 ) (3/30) 3.01 (3/30) ( 2 / 1 7 ) 2.92 ( 2 / 3 ) 2.73 1-98 2.21 1.90 2.3a 2.05 2.33 2.17 2.8U 2.86 2.89 2.93 2.96 2.91 2.96 2.97 2.99 3.01 2.18 2.18 2.25 2.27 2.33 (6/25) (1/8) (6/10) (9/2) (9/6) (5/26) (3/29) (2/23) • 38 .19 .1*3 32 .31* .13 .26 .18 .81*' • 30 .61 • 29 • 70 .51* .68 .56 .23 .22 .21 .19 .18 .66 .68 .6U .66 •63 2 / Weekly averages of d a i l y f i g u r e s . The old s e r i e s i n c l u d e s f u l l y t a x a b l e , m a r k e t a b l e 2 1 / 2 p e r c e n t bonds due or f i r s t c a l l a b l e a f t e r 12 y e a r s , through September 1955, and t h o s e due or c a l l a b l e i n 10-12 y e a r s t h e r e a f t e r ; t h e average term t o f i r s t c a l l of the bonds i n c l u d e d d e c l i n e d from l b y e a r s i n e a r l y 1953 t o 11 1/2 y e a r s i n e a r l y 1956. The new s e r i e s i s comprised of t h e 3 p e r c e n t bond of 1995 and t h e 3 1 / h p e r c e n t bond of 1978-83. 3/ Thursday f i g u r e s . Only g e n e r a l o b l i g a t i o n bonds a r e i n c l u d e d ; average term i s 20 y e a r s . Note.—Highs and lows a r e f o r i n d i v i d u a l s e r i e s and may be on d i f f e r e n t d a t e s for different series. EXHIBIT B L O W E R - G R A D E BOND YIELDS Date Corporate Baa 1/ State and local govt. Baa 2/ State and local govt, rev. 3/ (Per cent) 1953 - High 1956 - High Low 3.89 3.50 3.7U 3-a 3.63 3-U5 3.62 3.58 March 2 March 9 March 16 March 23 March 30 3.58 3.58 3.59 3.60 3.62 195k - High 1955 - High (9/18) (1/2) (1/8) (12/31) (12/30) (l/Ui) ( 3/30) (3/9) 3.79 2.96 3.32 2.93 3.26 3.02 3.29 3.20 3.20 3.20 3.23 3.26 3.29 (6/25) (1/8) (1/7) (8/5) (12/29) (1/6) (3/29) (3/8) 3.27 2.71 3.00 2.72 2.99 2.76 3.00 2.89 (6/26) (1/2) (1/1) (8/13) (12/30) (1/7) ( 3/30) (2/2U) 2.90 • 2.91 2.96 2.98 3.00 . _ Average term of bonds included i s 25-26 years. 2/ Thursday figures. Only general obligation bonds are included; average term i s 20 years. . 3/ Friday figures. Average rating of bonds included i s between Baa and A; average term i s 20 years. Note.—Highs and lows are for individual series and may be on different dates for different series. STOCK MARKET Millions ot Dollars . Weekly P*r Cent J, 7 T Date Stock p r i c e Trading Common volume 2/ (millions yields 3/ of s h a r e s ) ( p e r c e n t ) Stock market customer c r e d i t Customers' d e b i t b a l - loans to ances h / " o t h e r s " 5 / Total ( M i l l i o n s of d o l l a r s ) 1953 - High Low 195k - High 1955 - High 1956 - High Low February March 16 March 23 March 30 167.1 lltU.O 221.lt 156.5 270.7 217.1 288.U 257.L (1/2) (9/18) (12/31) (1/6) (12/30) (l/lli) (3/23) (1/20) 266.3 283.2 286.0 288. L 287-8 2.5 0.9 3.7 l.lt I4.6 1.5 3.1 2.0 5-75 5-15 5-33 U.20 L.22 3.78 U.08 3.93 2,Uh5 2,055 3,h36 2,1,05 U,030 3,537 li,0U0. 3,991 1,665 1,31k 2,388 1,653 2,805 2,517 2,786 2,7UO 2.3 2.7 3.1 2.8 2.8 3.93 3,991 2,7UO . n.a. 1 n.a. 780 661, 1,018 7U6 1,21,1 1,018 1,267 1,21,9 1,251 1,252 1,252 1 / SEC i n d e x of 265 common s t o c k s , weekly c l o s i n g p r i c e s , 1939-130; converted t o 19E7-U9-100 t y F e d e r a l R e s e r v e . The c o n v e r s i o n f a c t o r i s 1 2 3 . 9 1 . 2 / Averages of d a i l y t r a d i n g volume on t h e New York Stock Exchange. 3 / Moody's 200 common s t o c k s ; end of month f i g u r e s . £ / End of month f i g u r e s f o r member f i r m s of t h e New York Stock Exchange which carry*"margin a c c o u n t s ; e x c l u d e s b a l a n c e s s e c u r e d by U. S . Government o b l i g a t i o n s . 5 / Wednesday f i g u r e s f o r weekly r e p o r t i n g member b a n k s . Excludes l o a n s f o r p u r c h a s i n g o r c a r r y i n g U. S . Government s e c u r i t i e s a t banks i n New York and Chicago. Weekly r e p o r t i n g banks account f o r about 72 p e r c e n t of l o a n s t o o t h e r s . N o t e . - - H i g h s and lows a r e f o r i n d i v i d u a l s e r i e s and may be on d i f f e r e n t d a t e s for different series- Exhibit D Corporate and State and Local Government Security Offerings and Placements (In millions of dollars) • 1955 J anuary February March April May June I 487 e/725 e/975 5k6 4.36 1,261 800 h9h 903 697 July August September 583 654 680 October November December 1,207 ~ 631 921 1st .quarter 2nd quarter 3rd quarter 4th quarter Year e/2,185 1 s t quarter 2nd quarter 3rd quarter 4 th quarter Year- e/1,765 New, c a p i t a l Corporate 1955 1 2,213 2,09k 1,917 2,760 9,OIL . - State and l o c a l 1 1955 1 1954 1956 5U7 426 635 e/hOO e/6S0 2/375 5# 312 538 396 411 565 L97 6 56 612 e/350 127 #0 641 73U 748 853 909 335 7U7 470 .219. 406 1,003 290 604 1,608 1,995 1,991 .1,896 7,190 sA,k2$ - 1954 2# 261 649 . 919 6# 408 59k U23 877 1,385 l,kl8 i,124 1,984 5,911 1,372 2,33 k 1,168 1,894 6,789 Excluding finance companies 2/ 1,791 1,912 . l,4Ul 2,619 7,762 1,527 1,927 1,911 1,792 7,158 e / Estimated. T/ Includes $637*2 million AT&T convertible debenture i s s u e . 2 / Total new c a p i t a l issues excluding o f f e r i n g s of sales and personal finance companies. Note.—Details may not add to t o t a l s due to rounding. H.lL Exhibit E Large Public S e c u r i t y Issues f o r New C a p i t a l (Other than U. S. Treasury) 1 / Proceeds of Large Issues Offered (Millions of d o l l a r s ) Month Corporate 1955 ~ March April May June July August September . October November December 1956 - January February March 750 173 U8'3, 175 101 W5 328 805 • 221 263 95 212 278 S t a t e and z l o c a l government 337 2# 152 U03 278 65 23U 716 #6 2# 192 U33 163 1 Other 2/ 15 25 50 Large I n d i v i d u a l Issues Offered during March • Issuer Type 3/ Amount Coupon (millions Maturity r a t e or O f f e r i n g Rating of net interyield dollars) e s t cost CORPORATE B e l l Telephone of Pa. Deb. Houston Lighting & Power 1st mtg. bds. Fruehauf T r a i l e r Co. Conv. sub. deb. P a c i f i c Gas & E l e c t r i c 1st & r e f . mtg. bds. Whirlpool-Seeger SF deb. New York Tel. Ref. mtg. bds. Pa. S a l t Mfg. SF deb. Tide Water Associated Oil SF deb. 35-0 30.0 37.5 25.0 1996 1996 1976 1988 3 1A 3 lA h 3 3/8 3.20 3.19 U.oo 3.32 30.0 55.0 15.0 5o.o 1980 1996 1981 1986 3 1/2 3 3/8 3.U5 3 1/2 3.50 3.35 3-L5 3.50 Aa . Aa Baa Aa 1 A A Aaa A STATE & LOCAL GOVERNMENT San Antonio, Texas Penn Township School D i s t r i c t , Pa. S t . Louis, Missouri G.O. 5.o :1957-76 2.7h 1.90-2.75 Baa L.L. G.O. 5.3 12.2 1957-86 1962-75 3.31 2.16 1.95-3.35 1.85-2.25 Baa. Aa H.lU E-2 Large Individual Issues Offered during March (Cont'd) Issuer Type 3/ Coupon Amount Offering Rating (millions Maturity r a t e or yield net i n t e r of e s t cost dollars) STATE & LOCAL GOVERNI-JENT (Cont'd) Santa Clara, C a l i f . Denver Colo., School D i s t r i c t jfl Bethlehem Auth., Pa. S t a t e of Alabama State' of flew Hampshire San Diego, C a l i f . Milwaukee, Wisconsin .State.of New Mexico Dallas, Texas Wash. State Toll . Bridge Auth. State of Delaware S t . Louis Co., Mo. Louisville, Kentucky G.O. 5*2 1957-81 G.O. Rev. L«L • G.O. Rev. G.O. L.L. G.O. 28.5 1957-75 • 8.0 1959-96 15.0 1958-75 1957-83 19.3 6.0 1956-75 8.0 1957-76 5.0 . 1957-61 8.5 1957-76 Rev. G.O. G.O. G.O. 9.3 10.8 10.7 6.0 1961-71 1957-76 1957-76 1957-96 2;29 1.60-2.35 Aa 2.27 2.81 2.96 2.25 2.57 2.2k. 2.08 2.69 1.60-2.30 2.00-2.82 2.00-2.90 1.60-2.35 1.80-2.60 1.60-2.30 1.65-2.00, / 1.80-2.70=/ Aa A A Aaa Aa Aaa Aaa A 3.32 2.1*5 2.52 2.53 3.00-3.20 1.70-2.1+0 1.80-2r50 1.50-2,65 Aa Aa Aa OTHER None1/ Includes corporate and other s e c u r i t y o f f e r i n g s of $lp million and over; . State""and l o c a l government s e c u r i t y o f f e r i n g s of &5 million and over. 2/ Includes foreign government and International. Bank f o r Reconstruction and Development i s s u e s . 3/ In the case of S t a t e and l o c a l government s e c u r i t i e s , G.O. denotes gene r a l obligation; Rev., revenue bonds; G.R., general obligations additionally secured by f a c i l i t i e s revenues; _L.L.,_ limited l i a b i l i t y obligations secured by. pledge of designated revenues. h / 1976 maturity not r e o f f e r e d . H.lU Exhibit F Forthcoming Large Public Security Offerings f o r New Capital (Other t h i n U. S. Treasury) 1 / Expected Proceeds from Forthcoming Large Issues Subsequent to During month following date shorn date shorn Corporate J Other 2 / j Corporate |other 2 / Date of computation 211 125 160 67 107 222 805 202 215 70 176 123 380 Mar. 31 Apr. 29 May 31 June 30 July 29 Aug. 31 Sept. 30 Oct. 31 Nov. 30 Dec. 30 Jan. 31 Feb. 29 Mar. 30 208 116 339 3UU 100 18U 8U3 330 205 121 327 220 132 50 922 1,1U1 850 830 1,135 920 909 hl2 230 85 376 233 1,013 2,009 1,917 1,861 1,81*5 2,018 1,971 2,205 i,65o 756 618 917 785 811 50 — Forthcoming Large Offerings, as of March 30 Issuer type Amount (millions Approximate date of o f f e r i n g of d o l l a r s ) CORPORATE Bank of America Com. stock 56.0 Scott Paper Conv. deb. - 98.7 SF deb. 1 s t mtg. bds. 1 s t mtg. bds. Com. stock Sub. deb. Deb. 1st &ref. mtg.bds. 1 s t mtg. bds. 1st & ref.mtg.bds. Conv. deb. 25.0 15.0 20.0 3U.lt 20.5 UO.O Uo.o 30.0 30.0 53.0 P l a n t a t i o n Pipe Line Florida Power and Light Duquesne Light C a t e r p i l l a r Tractor VJestcoast Transmission Ltd. Columbia Gas Southern C a l i f o r n i a Edison Wisconsin E l e c t r i c Power *-Duke Power ^General. -Telephone ^General E l e c t r i c ^*American Telephone and Telegraph Deb. Deb. 300.0 250.0 April 2 ( r i g h t s expire) April 3 ( r i g h t s expire) April 3 April h April U April U April 5 April 10 April 17 April 2k Hay 7" May ( r i g h t s expire) Spring June H.Ik F-2 Forthcoming Large O f f e r i n g s , as of March 30 (Cont'd) Issuer Type • Amount Approximate date (millions of o f f e r i n g of d o l l a r s ) STATE AND LOCAL GOVERNMENT Escanaba, Michigan Louisiana S t a t e Building Auth. Philadelphia School D i s t r i c t , Pa. -^•State of Massachusetts Omaha P u b l i c Power D i s t . ^ Neb. ^ D e t r o i t , Michigan -^Stat.e of Ohio . -^-Philadelphia, Pennsylvania Georgia Rural,Roads Authority Chesapeake Bay Ferry Commission . F l o r i d a S t a t e Turnpike Auth. Oklahoma Turnpike Authority Pennsylvania Turnpike Commission Washirgton S t a t e Toll Bridge Auth. S a l t River P r o j e c t , Arizona Ihter-American Center Auth., F l a . Rev. L»L« G.O. G.O. Rev. G.O. G.O. G.O. Rev. Rev. Rev. Rev. n.a. Rev. 7-0 12.0 12.0 16.0 15.0 $.h 50.0 12.3 15-5 20.0 209.0 65.0 62.0 227.0 11.0 70.0 April b April 5 April 10 April 10 April 11 April 12 April 25 April 25 May Spring Summer 1956 1956 1956 1956 1956 None •x—-Included in t a b l e f o r f i r s t time. • n. a.—Not a v a i l a b l e . l/."Ineludes corporate and other i s s u e s of $15.million and over; S t a t e and l o c a l government i s s u e s of $5 m i l l i o n and over. 2/ Includes foreign government and I n t e r n a t i o n a l Bank f o r Reconstruction and Development i s s u e s . ExMbit G K.lU Yields on New and Outstanding E l e c t r i c Power Bonds, Rated Aa and A 1 / Date Aa-rated o f f e r i n g y i e l d s A-ratM offering yields Amount above Actual I Amount above Actual (per c e n t ) Reasoned y i e l d s (per cent) seasoned y i e l d s |(basis points) (basis points) 1952 average 3.16 13 3-35 12 1953 average 3*U6 16 3-78 26 195U average 3.03 3 . 3.12 1955 average 3.23 9 . 3.33 *3.15 *3. Ik *3.17 None *3.22 | *3.20 1 None None *3.32 *3.25 *3-27 *3.32 13 7 8 1955 - January February March April May June July August September October November December 1956 - January February 15 28 29 March 8 16 30 . 10 7 .10 7 7 12 None 3.15 3 3.19 5 None *3.23 3.29 3.31 3- 35 *3.30 - None *3.5% *3.50 3-28 None None -3 - 12 9 lk 16 lk 10 30 23 -5 — None — 3.20 3.25 -8 -3 c/3.35 3.55 7 25 _L -^Single observation, not an average. 1 / Covers only 30-year f i r s t mortgage bonds, as reported i n Moody's Bond Survey. Except where i n d i c a t e d , t h e a c t u a l y i e l d f i g u r e and the amount above seasoned y i e l d s are averages of o f f e r i n g s during t h e i n d i c a t e d period and of the d i f f e r e n c e s between t h e s e new o f f e r i n g y i e l d s and y i e l d s on seasoned i s s u e s of s i m i l a r q u a l i t y f o r the same day. The number of new i s s u e s included in the monthly averages v a r i e s from 2 to U except f o r October 195U when 6 A-rated i s s u e s were included. Average m a t u r i t y f o r the seasoned i s s u e s v a r i e s from 26 to 28 y e a r s .