Full text of H.16 Capital Market Developments : December 14, 1959

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Not for Publication

DECONTROLLED AFTER SIX MONTHS

H.ll;

December-lli, 1959.
CAPITAL MARKET DEVELOPMENTS

y

\

(Including Quarterly Review of
Corporate Security Financing)
The volume of-public--security financing for new capital was
quite small last week, but is.expected to be somewhat larger, although
still moderate, this week^J During the week ending December 11, corporations sold large issues amounting to ^30 million and State and local
governments sold bonds totaling $30 million. A $100 million issue of
the State of California had also been scheduled for sale last week, but
was postponed until January. Press reports indicate that the postponement resulted from doubts on the part of State officials as to whether
the only bid expected would reflect the decline in interest rates since
the last major sale by the State in September.
1'his week is expected to include offerings of all of the large
issues remaining on the calendar for this year. Corporate issues are
expected to total §75 million; and State and local government offerings
with aggregate proceeds of 495 million are expected.
Bond yields - Yields on outstanding bonds showed little change
last week. Yields on high-grade corporate and U. S. Government bonds
increased slightly while those for State and local government and lower
grade corporate bonds remained stable.
Several first mortgage 'electric utility bond issues were
offered to the public last week. An Aa-rated issue was offered to yield
investors 5.30 per cent—22 basis points above that for an offering made
in late November. Two A-rated issues were offered at yields of 5•UU
and 5.k$ per cent—only slightly above the yield on a similar offering
made in late October.
Stock prices - Stock prices, as measured by Standard and Poor's
index of 500 common stocks, showed little net change last week, closing
at $8.P8 on December 11. Trading activity declined, averaging 3.it iaillio.
shares a day.
Corporate Security Offerings
in the Third Quarter 1959

t

Net proceeds of corporate security offerings during the third
quarter of 1959 totaled v 2.0 billion,, as shown in Table 1. Refunding
of outstanding securities was very small—^36 million as compared with
#101 million in the third quarter last year when interest rates were
much lower.




H.ll;

- 2 Table 1
Corporate Security Offerings for New Capital
by Type of Business of Issuer
Third Quarter 1955-1959 .
(Net proceeds in millions of dollars)

Total corporate offerings
Refunding
New capital
Manufacturing
Chemicals
Other transportation equipment
Primary iron and steel
Electrical machinery
Stone, clay and glass products
Nonelectrical machinery
Textiles and apparel
Paper
Motor vehicles and equipment
Foods
Lumber and wood products
Fabricated metal products
Other 2/
Electric, gas and water utilities
Communication
Railroad

1959

1958

1957

1956

1955

1,996

2,862

2,950

2,641

2,314

38
1,959

101
2,760

51
2,899

86
2,556

403
1,911

U78
77
6U
47
a
37
31
27
20
19
15
13
10
71*

1,112

810
32
10
92
58
49
145
16
19
149
4
2
16
218

736
125
4
72
51
1
106
17
• 52
126
9
52
25
93

495
-53
2
32
21
2
24
11
46
62
5
6
23
198

•

79
320
8
Ik
62
21
45
49
23
2
12
431

471

809

912

632

395

99

124

243

399

155

32

59

1+3

62

87

Other transportation

2hl

75

94

49

65

Commercial and other

102

429.

80

65

65

Mining
Financial and real estate
Sales and consumer finance
Other

43

53

492
233
229

116
29
87

-

77

149

104

620 "
315
302

439
309
130

573
Wf
106

1/ Less than $500,000.
"
'
2/ Includes small volume of foreign issues not further classified in the manufacturing group.
Note.—Details may not add to totals due to rounding.
Source.—Securities and Exchange Commission and Federal Reserve.




R.Ik

- 3-

Net proceeds for new capital - Corporations sold &2.0 billicn
of security issues to obtain new capital in the third quarter of 19593
30 per cent below the volume a year earlier. For the first nine months
as a whole, the volume of new capital issues totaled $6.7 billion, onefifth smaller, than in the corresponding period last year.
Financial and real estate companies were the most important
group of issuers during the third quarter,- selling securities totaling
$500 million. This volume was nearly three times as large as last year,
which had been unusually small (the smallest volume since third quarter
1952). Reflecting the sharp rise in consumer credit outstanding this
year, new capital issues of sales and consumer finance companies totaled
$263 million as compared with only ^30 million last year when the increase
in consumer credit was quite small; however, this volume was smaller than
/that of other recent third quarters. In August, C-MAC publicly offered
a $12.U million debenture issue and three other issues of moderate size
from si>25-50 million were also sold last quarter; a year earlier, no issues
over &15 million were sold. Offerings by banks, real estate and other
financial companies were also much larger than in the July-September
period last year.
New capital offerings by manufacturing companies, amounting
to $U78 million, were less than half the volume last year. The volume .
of securities sold by most types of industrial producers was in even
smaller volume than in the third quarter of 1958. Last year, the
volume was moderate for most manufacturers other than those of primary
iron and steel and petroleum which included the sale of very large
issues—over $150 million each by U. S. Steel corporation, Standard
Oil Company of California and Standard Oil Company of Indiana; no issues
of this magnitude were sold in the recent third quarter.
New issue volume by electric, gas and water utilities totaled
million, two-fifths less than last year ana tne smallest since
first quarter 1956. Offerings by communication, railroad, mining and
commercial and other companies were also in smaller volume than a year
earliery while offerings by transportation companies other than railroads
were in larger volume, largely reflecting the sale of two airlines
issues.
Total gross proceeds - Gross proceeds from corporate offerings,
which include refunding issues and costs of flotation, wejre &2.0 billion
in the third quarter. Publicly-offered issues, totaling *il.2 billion,
were nearly one-half smaller than a year earlier, while private placements amounted to $862 million, one-fifth greater.
As earlier this year, the decline in new financing during the
third quarter from that of a year earlier occurred largely in publiclyoffered bond issues. The volume of public bond issues was,less than
half as large as last year, while privately placed bonds were one-fourth




H.llt

- 4 -

larger. Stock financing—both by. common and preferred issues—was
smaller this third quarter. Convertible bond financing, totaling
nearly #200 million, accounted for one-eighth of all debt offerings
and was more than twice as large as in the comparable quarter of 1958.
Table 2
Total Coiporate Security Offerings by Type of Issue
Third Quarter 1955-1959
(Gross proceeds in millions of dollars)
Type of issue

19^9

I 1958

I 1957

I 1956

I

Total corporate offerings - 2,040

2,910

2,997

2,690.

2,358

Type of offering
Public
Private

1,17&
862

2,201
710

2,016
954

1,881
809

1,427
931

1,61*8
807
842

2,161
1,795
666

2,521
1,586
935

2,134
1,352
782

1,804
928
875

Type of security
Bonds and notes
Public
Private

1/

Preferred stock

63

104

72

99

150

Common stock

329

345

404

457

405

Convertible bonds

197

79

234

117

' n.a.

2/ Includes convertible bonds shown separately below.
Note.—Details may not add to totals due to rounding.
Source.—Securities and Exchange Commission.
More detailed information concerning recent capital market
developments is presented in the attached exhibits.
Developments in the Canadian capital market are presented in
Appendix 1 at the end of this report.

Capital Markets Section,
Division of Research and Statistics,
Board of Governors of the Federal Reserve System.




HIGH-GRADE

BOND

YIELDS

f

LOWER-GRADE

BOND

YIELDS




/Vf

U.S. G O V E R N M E N T

H.Ik

Exhibit ti
Tables for Exhibit A
High-grade Bond Yields

Date

U. S. Govt,
long-term 2/

Corporate
Aaa 1/

Spread between
U. S. Govt, and
Corporate State and
Aaa
local Aaa

State and
local govt.
Aaa J/

(Per cent)
1951* - Low
1957 - High
1958 - High
Low
1959 - High
Low

2.85
J».Ui
li.13
3.55
4.57
h.09

Nov.
Nov.
Nov.
Dec.
Dec.

L57
U.57
1*.55
1*.55
ii.56

13
20
27
1*
11 2/

U/23)
(9/27)
(10/10)
(5/2)
(11/20)
(1/9)

2.1,5 (8/6)
3.76 (10/18)
3.81* (12/26)
3.07 (V25)
1*.30 (9/18)
3.83 (1/2)

1.90
3.1*5
3.31
2.6U
3.65
3.06

a. 10
u.13
i*.i5
U.21
ii.22

3.1*7
3.1*1
3.38
3.38
3.38

(9/2)
(8/29)
(9/11)
(5A)
(9/21*)
(3/26).

.30
.60
.51
.22
- .50
.16
.1*7
.1*1*
.1*0
.31*
.31*

.30
.1*7
.72
.31*
.92
.53
.63
.72
.77
.83
.81*

Lower-grade Bond Yields

Date

Corporate
Baa 1/

Spread between
Aaa and Baa
State and
Corporate
local govt.

State and
local govt.
• Baa y
(Per cent)

1951* - Low
1957 - High
1958 - High
Low
1959 - High
Low

3.W*
5.10
1*.96
1*.51
5.29
1*.83

Nov.
Nov.
Nov.
Dec.
Dec.

5.27
5.27
5.26
5.25
5.25

13
20
27
1*
11 e/

(12/31)
(11/29)
(1/3)
(7/11)
(10/16)
(h/17)

2.93 (8/5)
1*.51 (6/29)
a.31* (9/11)
3.61* (5/1)
1*.1*6 (7/2)
3.92 (3/26)
1*.31
U-28
i*. 29
1*.33
1*.33

.

.52
1.27
1.28
.77
•77
.56

.96
1.21
1.11
.93
.98
.79

.70
.70
.71
.70
.69

.81*
.87
.91
.95

g/ Preliminary.
1/ Weekly average of daily figures. Average term of bonds included is 25-26 years
2/ Weekly average of daily figures. The series includes bonds due or callable in
10 years or more.
J/ Thursday figures. Only general obligation bonds are included) average term
is 20 years.
Note.--highs and lows are for individual series and may be on different dates for
different series.




1
STOCK

MARKET

1954
MORTGAGE

1957
AND

BOND




1958

1959

YIELDS

IISIDENTIAI MORTGAGES - FHA

/—

4
Exhibit D - Tables for kxtiibiL C
Stock Market

Date

Stock price
index 1/

Trading
Common
stock
volume y
yields 2/ (millions
of shares)

Stock market customer credit
Customers1
Bank
debit bal- loans to

Total

(Mil].ions of do:Liars)

1953-1958 - High
Low
1959 - High
Low

5U.li
22.95
60.51
54.37

3.30
6.25
3.08
3.34

4.9
0.9
4.3
2.1

4,492
2,055
4,764
4,4oi

3,285
1,314
3,401
3,210

October
November
Nov. 27
Dec. 4
Dec. 11 j>/

57.00
57.23
57.70
58.85
58.88

3.21*
3.21
3.22
3.16
3.16

2.8
3.4
3.4
3.6
3.4

4,401
n.a.
n.a.
n.a.

3,210
n.a.
n.a.
n.a.
n.a.

1,317
669
1,332
1,210

z
1,373
1,180
1,191
1,187
1,187
1,178
n.a.

n.a,—Not available.
g/ Preliminary.
1/ Standard and Poor's <*fmposlte Index of 500. corrmon atooka, weekly closing prices, 1941-43=10, Monthly data
are averages of daily figures rather than of Fridays' only. Higha and lows are for Fridays' data only.
2/ Standard and Poor's composite atook yield based on Wednesday data converted to weekly closing prices by
Federal Reserve. Yields shown are for dates on which price index reached its high or low.
3/ Averages of dally trading volume on the Now York Stock Exchange.
4/ tod of month figures for member firms of the New York Stock Exchange which carry margin accounts; excludes
balances secured by U. S. Government obligations.
5/ Wednesday figures for weekly reporting member banks. Be eludes loans for purchasing or carrying U. S.
Government securities• Prior to July 1, 1959, such loans are excluded only at banks In New York and Chicago.
Weekly reporting banks account for about 70 per cent of loans to others. For further detail see Bulletin.

Mortgage and Bond Yields 3/
Date
1953-1958 - High
Low
1959 - High
Low
1959 - July
August
September
October
November

FHA
mortgages 2/ •
5.63 (11/57)

4.56 (2/55)

5.80
5.57
5.75

5.80

n.a.
n.a.
n.a.

Spread between new
Aaa corporate
corporate bonds and
bonds 1/
New 3/ I Seasoned b/FHA mortgages|Seasoned bonds
4.81 (6/57) 4.12 (9/57)
2.74 (3/54) 2.85 (4/54)
4.57
5.29
4.12 •
4.29

1.96
.54
1.29
.83

.90
-.12
.77
.15

4.80
4.74
5.29
5.10
5.07

.95
1.06

.33
.31
.77
.53
.51

4.47
4.43
4.52
4.57
4.56

1/ Neither mortgage nor bond yields take into account servicing costs which are much higher for mortgagee than
bonds. Generally, bonds pay interest semi-annually| mortgages, monthly. Mortgage yields, if computed as equivalent
to a semiannual interest investment, would be slightly higher than given in the table.
2/ Based on FHA field-office opinions about average bid prices in the private secondary market for new-home
mortgages for imedlate delivery. Since late 1955, data relate only to 25-yenr mortgages with dcnnpayieents oflO

rated M a ; Aa or A by Moody's Inventors Service (except serial and convertible issues and offerings of natural ga.
and foreign companies) weighted by size of issue. Yields on Aa and A issues are first adjusted to an Aaa basis

R.a:for FRASER
Digitized
4/ Moody'• Investors Service. Monthly averages of daily data.


b

°"a" "" " r t "

See Exhibit B.

Exhibit E
Long-term Corporate and State and Local Government
Security Offerings and Placements
.(In millions of dollars)
New capital
1959

Corporate 1/
r
1950
I

1957

January
Februa xy
March

8k0
7k5
631

728
857
3/
1,553

1,060
1,065
1,320

636
856
645

812
953
511

7k2
572
506

April
May
June

899
791
87k

l,lkO
597
887

765
.1,1(53

931
592
981

798
895
551

765
5k6
393

July
August
September

531
718
709

1,107
5k 0
l,llk

1,003
92k
973

566
516

2*67

806
k03
651

529
58k
k3l

October
November
December

e/750
e/850
e/850

862
^18
920

1,090
789

2/573
e/k50
e/USO

k56
k7k
k35

1st
2nd
3rd
kth

2,216
2,56k
1,958
e/2,k50

3,139
2,623
2,760
2,300

,

2,138
2,50k
l,5k9
e/l,k73

2,276
2,22|k
1,860
1,365

1,820
1,70k
l,5kk
2,029

780
6,738
e/9,188

5,762
8,522
10,823

k,6k2
6,191
e/7,66k

k,520
6,380
7,7k6

7,099

quarter
quarter
quarter
quarter

1st half
Three quarters
Year

J M

1,076
3,kk5
3,lk9
2,899
2,95k.
6,59k
9,193
12A17

State and local 2/
I
1958
19W

.

698
633
698

3,52k

5,06?

Excluding finance companies k/
1st quarter
2nd quarter
3rd quarter
• iith quarter
Year

2,011
2,109
1,695
e/2,300

2,899
2,5%
2,731
2,213

2,810

e/8,kl5

10,k29

11,518

3,237
2,889
2,582

= r
e/ Estimated.
p/ Preliminary.
~~
1/ Securities and Exchange Commission estimates of net proceeds.
2/ Investment Bankers Association of America estimates of principal amounts.
3/ Includes $718.3 million AT&T convertible debenture issue.
k/ Total new capital issues excluding offerings of sales and consumer finance
companies.




Exhibit F

H.lli

Other Security Offerings 1/
(In millions of dollars)
Long-term
1959

1

1956

1

$

77
59
2

196
53

56
50
1*2

139
198
120

^8
h2

5
17

28
7
30

October
November
December

58
123
71*

1*
60
1

Year

99 2

Januaiy
February
March
April
May
June
July
August
September

<

85
36

1959

1957

199

30

April
May
July
August
September
October
November
December

190
428
295

S
21*6
i|67
399
2/231*

Year

1,163
251

72

523

125

175
—

60
161*

i

215
220

100

2,321

507

Short-1term
State and local government It/
January
February
March

Federal agency 3/
1 1958
1957

572

Federal agency 3/

233
2*60
273

326

$

359
500
1*89

371
208
11*1*

638
1*30
505

%
261*

20 5
337
153

1*86
675
289

209
161
329

336
1*69
501

289
1*23
369

272
272
252

727
365
665

1*37
206
330

221*
370
512

1*51*
ill*
137

1,238
255
116

g
21*3

1*59

3,910

3,271*

3,098

5,543

p/ Preliminary.
3 / Data presented in this exhibit differ from those in Exhibit E in that refund- ~
ing issues, as well as new capital issues, are included. Long-term securities are defined as those maturing in more than one year.
2/ Includes securities offered in the United States by foreign governments and
their subdivisions and by international organizations. Source: Securities and Exchange Commission.
y Issues not guaranteed by the U. S. Government. Source: long-term, Securities
and Exchange Commission; short-term, Federal Reserve.
h/ Principally tax and bond anticipation notes, warrants or certificates and Public
Housing Authority notes. In some instances PMA notes included may have a somewhat
term than one year. Source: Bond, Buyer.
Digitizedlonger
for FRASER



Exhibit 0

H.lU

Large Long-term Public Security Issues for New Capital
(Other than U. S. Treasury) 1/
Proceeds of Large Issues Offered
(Millions of dollars)
State and
local government

Corporate

Month

1958 - November
December
1959 - January
February
March
April
May

227
305
369
3W
215"
359
342
28U
110
363
199
too
421

July
August
September
October
November

Other 2/

259
229
335
551
369
563
258
635
194
263
2lL
291
163

100
79
m
35
176
20
50
60
50
98
175
20
—

Large Individual Issues Offered December 1 through 11

Type 3/

j

Amount
Coupon
(millions
Offering
Maturity
Rating
net inter- yield
of
dollars)
est cost
'

CORPORATE
Consol. Edison Co. of N.Y.
Gen. Telephone Co. of Cal.
Arkansas Louisiana Gas Co.
James Talcott, Inc.
Arkansas Pwr. & Lt. Co.

1st ref-.mtg.bds.75.0'
1st mtg. bus.
30.0
1st mtg. bds.
16.0
Sr. notes
15.0
1st mtg. bds.
15.0

1989
1989
1979
1979
1989

5
5
5
5
5

1/k
1/6
1/2
5/8

5.15
5.00
5.15
5.55
5.k5

Aa
A
A

STATE AND LOCAL GOVERNMENT
Salt River Project Agric.
Imp. & Pwr. Dist., Ariz.
Los Angeles Sch. Dists.,
California
Columbus, Ohio
Los Angeles Co., Calif.
State of Massachusetts
Commonwealth of Puerto Rico
Chicago Bd. of Educ.,111.
•

Rev.-Ut.

15.0 1963-92/69 U.05

3.10-U.15

G.O.
G.O.
Rev.-Ut.
G.O.
G.O.
G.O.

21.5
•10.0
13.0
21.6
20.0
10.0

3.89
3.49
5.65
3.52
h.'o$
3.68

2.90-3.90
2.80-3.55
5.51
2.80-3.65
3.00-14.05
3.00-3.70

5 1/2

5.89
5.10

1961-85
1962-86
1999/65
1960-89
1961-80/75
1962-79

OTHER '

Credit Foncier de France
Alberta Mun. Fin. Corp.




Ext. loan bds.
S.F. deb..

50.0
20.0

1979
1982*

Aa
Aa
Aa

H.lk

0-2
Footnotes

1/ Includes corporate and other security offerings of $1$ million and over;
State and local government security offerings of $10 million and over. 2/ Includes foreign government and International Bank for Reconstruction and
Development issues and non-guaranteed issues by Federal agencies.
J/ In the case of State and local government securities, G. 0. denotes general
obligations; Rev.-Ut., revenue obligations secured only by income from public
utilities; Rev.-Q.Ut., revenue bonds secured only by revenue from quasi-utilities;
Rev.-S.T., revenue bonds secured by revenue f rom specific taxes only; Rev.-Rent.,
revenue bonds secured solely by lease.payments.




Exhibit H

H.Ik

Forthcoming Large Long-term Public Security Offerings for New Capital
(Other than U. S. Treasury) 1/
Expected Proceeds from Forthcoming Large Issues
During month following
date shown

Date of
computation

1958

Subsequent to
date shown

Corporate S a l govt. I 0 t h e r i/ Corporate

Nov. 28
Dec. 31
Jan. 30
Feb. 27
Mar. 31
Apr. 30
May 29
June 30
July 31
Aug. 31
Sept. 30
Oct. 30
Nov. 30

301
210
270
198
396
21*6
287
16$
238
198
37k
382
226

229
261
551
292
550
25U
21*7
11*6
356
385
270
. 115
295

1*01
370
365
279
1*76
3U6
332
272
305
517
691*
509
271

71
75
1*5
20
50
50
25
70

gj^Jottor %/
683
515
856
1*81
761517
761
500
1*06
1*02
1*70
336
1*85

71
75
1*5
20
50
50
25
70

Forthcoming Large Offerings, as of December 11
Issuer

Type

Amount
(millions Approximate date
I of dollars) of offering

CORPORATE
Dallas Power & Light Go.
Public Service Electric & Gas Co.
Bell Telephone Co. of Pa.
Kansas City Power & Light Co.
*C.I.T. Financial Corp.
•^Northern Illinois Gas Co.
^Commercial Credit Co.
Commerce Oil Refining Corp.
STATE AND LOCAL GOVERNMENT
Houston Indep. Sch.rDist., Texas
State of New Jersey
De Kalb Co. Sch. Dist., Ga.
-it-Seattle, Wash.
*New York State Pwr. Auth.
State of California
*City and Co. of San Francisco, Calif
OTHER
None




1st mtg. bds.
Com. stk.
Deb.
1st mtg. bds.
Deb.
Pfd. stk.
Notes
Deb., bds. & com.
G.O.
G.O.
G.O.
Rev.-Ut.
Rev.-Ut.
G.O.
G.O.

20.0
25.0
30.0
20.0
75.0
15.0
50.0
1*5.0
16.9
66.8
11.5
11.8
200.0
100.0
13.6

Dec. 15
Dec. 16
Dec. 16
Jan. 7
Jan. 8
Jan. 13
Jan.
Indefinite
Dec.
Dec.
Dec.
Jan.
Jan.
Jan.
Jan.

11*
16
16
11
12
13
18

H-2
Footnotes
*—Included In table for first time.
1/ Includes corporate and other issues of $L5 million and over; State
and local government issues of $10 mill ion and over,
2/ Includes foreign government and International Bank for Reconstruction
and Development issues and non-guaranteed issues by Federal agencies.
Note.—Deletions for reasons other than sale of issue; None.




Exhibit I

H.lli

Yields on New and Outstanding
Electric Power Bonds, Rated Aa and A 1/

Date

1952 - 1958
High
Low
1959 - January
February
March
April
May 1
13
Ik
20
21
26
June It
17
26
July 9
10
15
30
Aug. 5
20
Sept. 18
Oct. 22
23
28
29
30
Nov. 25
Dec. 8
9
10

Aa-rated offering yields
A-rated offering yields
Amount above
Amount above
Actual
Actual
seasoned
yields
(per cent)
(per cent) seasoned yields
(basis points)
(basis points)

5.00 (9/11/57)
2.93 (3/31/54)

if

87
-3
37
4
10
17

4.95
4.95

38
34

5.00

38
29

4.95

4.93

31

it. 85
it. 80

2k
22
k6

5.50 (11/7/57)
3.00 (3/17/54)
A . 75^/

28
23

*4.67

18

4.85

5.06

17
13

5.13

27

4.922/

6
24
19

5.io

5.oo

19
13

5.65

60

5.25
5.4o

35
50

5.45
5.44

51
50

5.io
=#

16
5.15

40

5.15

42
k2
63

5.08
5.30

*—Single observation, not an average.
1/ Covers only 30-year first mortgage bonds, as reported in Moody's Bond
Survey. Except where indicated, the actual yield figure and the amount above
seasoned yields are averages of offerings during the indicated period and of
the-differences between these new offering yields and yields on seasoned issues
of similar quality for the same day. Average maturity for the seasoned issues
varies from 26 to 28 years.
2/ Provides for a 5-year period during which issue may not be called for
refunding at a lower coupon rate. Monthly averages so marked include one or
more issues with such a provision. Other issues have no such provision.
3/ Provides for a 7-year period during which issue may not be called for
Digitizedrefunding
for FRASER
at a lower coupon rate.



December 111, 1959
Appendix 1
MONET AND CAPITAL MARKET DEVELOPMENTS IN CANADA
Yields in all maturity sectors of the Canadian Government
bond market turned up last week. The rise of 9 basis points in the
average auction rate for 3-month bills was unusually small, however,
considering the sharp rise in the 3-month bill rate in the United States
in the past tiro weeks and in the 50 points advance in the rate for dayto-day loans in Canada. After taking into account the continued sizeable
discount on the 3-month future Canadian dollar, the interest advantage
from moving short funds to the United States remained, for the second
straight week, in excess of one-half of one per cent.
Money market conditions - L6st Thursday's auction rate for
3-month bills rose to 5.02 per cent from U„93 per cent the week before#
The rate for 6-month bills rose more sharply, from 5<>12 per cent to
£•32 per cent. The average closing rate on day-to-day loans for the
week ending Wednesday rose very sharply, by 50 basis points, to U.65 per
cent. In spite of this indication of a tightening market, the chartered
banks' average liquidity ratio continued unchanged at 16.7 per cent,
well above the 15.0 per cent minimum.
After taking account of the discount on the forward Canadian
dollar, there was an interest advantage of about 60 basis points in
switching funds out of Canadian and into United States Treasury bills
last Friday.
Bond market developments - Canadian bond yields, which were
apparently held down by Bank of Canada,intervention week before last
during the Canadian National Railway 'issue, rose rather sharply last
week although yields on most government issues still remained below«
their highs at the end of September. Spreads between comparable Canadian
and United States issues widened but also remained less than in September
and October. At midweek, spreads between comparable Canadian and United
States Government securities were (figures in parenthesis refer to the
previous week):
0.38
0.35
0.61
1.02
1.03

per
per
per
per
per

cent
cent
cent
cent
cent

on
on
on
on
on

91-day bills (0.U3)
182-day bills (0.23)
a 9-year bond (0.52)
a 20-year bond (0.9U)
a 36-year bond (1.03)

Stock markets - Share prices on Canadian stock markets
generally rose last week. Trading was fairly active early in the week
but then fell off on Thursday and Friday. Uranium shares — in a period .
of great uncertainty because of the announced cutback in the United States
ore purchases — continued to be heavily traded. At Thursday's close,
the Montreal industrial average was 2 per cent higher than the week
before and 5.U per cent below the high for the year*




Appendix 1-2
Selected Government of Canada Security Yields
Spread between
Canadian & U.S. rates
3-mo.
long-term
bonds/
bills2Z

Date

3-month
Treasury
bills]/

Intermediate
Govtbond^/

Longterm
Govt,
bond2Z

1957 - High
1958 - High
Low
1959 - High
Low

U.08
3.65
0.87
6.16
3.25

U.81
U.52
3.31
5.30
U.U5

U.35
U.U2
3.78
5.30
U.U1

1.19
0.U7

2.96
0.30

5.10
5.12 .
5.12
5.19

5.17
5.1h
5.12
5.20

1.0U
1.0U
0.9it
1.02

0.58
0.58
0.U3
0.38

Nov. 18
25
Dec. 2
9

^

^ 1.91
U.86
h.93
5.02

Discounon 3—mo,
Canadiai
dollar A/

0.71
1.01
0.89
1.01

1/ Average yield at weekly tender on Thursday following Wednesday date shown. ~
2j Government of Canada 2-3/1; per cent of June 1$, 1967-68.
3/ Government of Canada 3-1/L per cent of 1979.
5/ U.S. Government 3-l/L per cent of 1978-83. Government of Canada 3-1/h per
cent of 1979.
£/ Spread between average auction rates: on Monday preceding Wednesday date
shown for the United States5 on Thursday following Wednesday date shown for Canada.
6/ Spread between 3-months forward and spot price of the Canadian dollar,
expressed as per cent per annum, on Friday following Wednesday date shown.
Average's of Selected Bond Yields

Date

10
Provincials!/

10
Municipals]/

10
Public
Utilities]/

10
Indus- .
trials!/

Govt, of
Canada
long-term^/

19511-55 - Low
1957 - High
1958 - High
Low
1959 - High
Low

3.27
5.18
5.08
U.U6
6.19
5.1h

3.65
5.77
5.30
5.02
6.60
5.38

3.69
5.50
5.03
U.81
6.01
5.1U

3.93
5.77
5.12
Uo78
6.05
5.22

3.18
k.2 9
U.78
3.88
5.61
U.70

Sept. 1
Oct. 1
Nov. 2
Dec. 1

5.97
6.19
6.06
5.97

6.20
6.60
6.53
6.52

5.78
6.01
6.00
6.00

5.78
6.05
6.03
6.02

5.52
5.61
5.52
5.52

1/ Average term of bonds included is lU-ib years. Source: McLeod, Young,
Weir and Co., Ltd.
2/ Government of Canada 3-3A P e r cent of January 15, 1975-78.