Full text of H.16 Capital Market Developments : July 19, 1956

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Not for Publication

DECONTROLLED AFTER SIX MONTHS

H.lli

July 19, 1956
CAPITAL MARKET DEVELOPMENTS

The large volume of large corporate issues sold publicly
during the week ending July 11 was primarily accounted for by AT&T's
$250 million debenture issue. Despite the size of the issue, an
attractive offering yield of 3.73 and other features of the offering produced a rapid sellout. A $30' million Baa gas transmission
debenture, priced to yield U.50, likewise found a receptive market.
An initially crowded calendar of large State and local issues was
reduced by postponement of two highway bond issues. This left only
two large tax-exempt issues totaling |6o million, both of which
moved well at relatively high yields.
Originally scheduled for the week ending July 20 were
large corporate issues totaling approximately $165 million. Ons
- of these, a $J0 million debenture offering by J. P. Stevens Company,
has since been postponed "for the time being". A relatively small
volume of large State and local offerings, amounting to only $35
million, are also on the week's schedule,
More recently AT&T has announced plans to raise $575
million this fall through a subscription sale of stock at a ratio
of one new share at $100 for each ten held currently by stockholders.
This will be the largest new capital stock offering on record.
Bond yields - Yields on outstanding Aaa bonds showed no
significant change during the past week. Corporate Baa's remained
at the 1956 high of 3.78 per cent reached the previous week, and
similarly rated State and local issues continued to edge upward
to 3.3U per cent, an increase of 3 basis points.
Offering yields on new issues continue to be relatively
high. An Aa-rated electric utility, 30-year, first mortgage bond
was marketed on July 18 to yield 3.62 per cent—ten basis points
above a comparable offering early in June but still substantially
below the yield of 3.77 per cent recorded for an offering in early
April. The recent Massachusetts, offering of Aa-rated general obligation bonds provides an opportunity to compare the longer-term
upward trend for State and local offering yields. Information
concerning this and three previous serial issues over the past 16
months is summarized on the following page.




H.lit

Date

- 2

Amount
of
issue

5-Iear
New
issue

-

Yield to maturity'
IC-Year
20-Year
New
OntNew i Outissue standins 1/ issue 1 standing 1/

(Mill, of doll.)
Mar.
Nov.
Apr.
July

29,
16,
10,
11,

1955
1955
1956
1956

60.9
159.8
18.0
38.5

1.50
1.90
2.15
2.20

1.80
2.10
2.35
2.35

1.77
2.05
2.38
2.39

2.20
2.35
2/
2.55

2.26
2.30
2.58
2.57

1/ As measured by'Moody's Aa municipal bond yield averages.
2/ None issued

Throughout 1955 the rate of increase on new issues exceeded the rate at which, yields increased on comparable outstanding
issues. During 1956, however, the reverse has been true; yields
on outstanding bonds—as measured by Moody's Aa municipal yield
series for issues with 10 and 20-year maturities—have increased
more rapidly than those on new Massachusetts offerings. A somewhat
closer correlation appears to exist between the movement of outstanding and offering yields in the case of bonds with a 10-year
maturity than for those not due for 20 years.
Stock market credit - Customer credit in the stock market,
excluding U. S. Government securities, decreased during June—falling to a total of $1±,009 million at the month's end. The decline
of $38 million resulted from a decline of &2h million in net debit
balances (reversing an increase of nearly the same amount the preceding month) and a continuing decline, amounting to $lh million in
June, in bank loans to others. A slight increase of $9 million in
money borrowed except on U. S. Government securities by member firms
of the NYSE maintaining margin accounts brought the June total to
$2,195 million. These and other details are tabulated on the following page.

m




H.lU

- 3 -

End of month
MayJune

Change

(Millions of dollars)
Customer credit
Excluding U. S. Govt, securities - Total
Net debit balances
Bank loans to "others"
Net debit balances secured by U.S. Govt, securities
,• Bank loans to others for purchasing or carrying
U. S. Govt, securities
Broker and .dealer credit
Money borrowed except on U.S. Govt, securities
On customer collateral
Money borrowed on U.S. Govt, securities
Customers' net free credit balances

It,009
2,786
1,223
3h

U,0U7
2,810
1,237
38

kQ

ilO

2,195
1,81*9
39

2,186
i/1,81J2

836

k2
870

r / Revised.

Stock prices - The SEC index of 265 common stocks rose to
289.2 at the close of the week ending July 13. This was an increase
of 3.1 points over the preceding week and brought the index within
1.6 points of the 1956 high reached early, in April. Daily indexes
indicate continuing gains during the early part of the week, leveling off with a fractional decline on Wednesday, July 18.
More detailed information concerning the recent capital
market developments is presented in the attached exhibits.

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




-38
-21*
-Ik
-h

+8
+9

+7
-3

^3h

EXHIBIT A

HIGH-GRADE BOND YltLDS
3.50

7v

GOVERNMENT Aaa

j 2.00

U. S . Govt., long-term 2/
Date

Corporate
Aaa 3/

Old series

New series

Spread between
U.. S. (
State and
local govt. (old ser ies) and
Corporate State and
Aaa 3/
local Aaa

(Per cent)
1953 - High
195k - High
1955 - High
1956 - High
Low
June 15

July 6
July 13

3.U2
2.99
3.09
2.85
3.17
2.91
3.30
3.07

(6/19)
(1/9)
(1/8)

3.15 (6/6)
2.76 (12/26)
2.7U (1/9)

(V23) 2.hh (8/7)

(12/23) 2.9h (8/5)
2.62 (1/7)
(1/7)
(5A) 3.08 (ii/20)
2.80 (2/17)
(3/2)

3.26
3.26
3.27
3.26
| 3.27

2.87
2.88
2.92
2.90
2.95

n.a.

2.73
1.98
2.21
1.90
3.03 (8/5)
2.31
2.89 (6/10) 2.05
3.13 (it/20) 2.51
2.92 (2/3)
'2.17
2.97
2.98
3.00
2.98
3.01

2.33
2.32
2.3b
2.38
2.38

(6/25)
(1/8)
(6/10)
(9/2)
(9/8)
(5/26)
(5/3)
(2/23)

.38
.19
.13
.32
.3U
.13

.Uo

'

.8h
.30
.61
.29
.70

•5h

.68

.13

.•hS

.39

.5b
.56
.58
.52
.57

.38
.35
.36
.32

2/ Weekly averages of daily figures. The old series includes fully taxable,
marketable 2 1/2 per cent bonds due or first callable after 12 years through
September 1955, and those dur or callable in 10-12 years thereafter; the average
term to first call of the bonds included declined from lL years in early 1953 to
11 1/2 years in early 1956. The new series is comprised of the 3 per cent bond
of 1595 and the 3 l A per cent bond of 1973-83.
2 / 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.




EXHIBIT. B'

LOWER - GRADE BOND YIELDS
Weekly

Per cent per annum

V

Date

!

Corporate
Baa 1/

State and
local govt.
Baa £J

State and
local govt,
rev. jy

(Per cent)
1953 - High

1956 - High
Low

3.89
3.50
3.7L
3.Uh
3.63
3.U5
3.78
3.58

June
June
June
July
July

3.75
3.75
3.77
3.78
3.78

195k - High
1955 - High

15
22
29
6
13

(9/18)
(1/2)
(1/8)
(12/31)
(12/30)
(1/lU)
(7/13)
(3/9)

3.79
2.96
3.32
2.93
. 3.26
3.02
3.UU
3.20

(6/25) .
(1/8)
(1/7)
(8/5)
(12/29)
(1/6)
(5/3)
(3/8) .

I/]'#

&£
3.3k

'

3.27
2.71
3.00
2.72
2.99
2.76
3.12
2.89

(6/26)
(1/2)
(1/1)
(8/13)
(12/30)
(1/7)
(it/27)
(2/21*)

3.00
3.01
3.03
3.0k
3.05

r/ Revised.
• 1/ Weekly average of daily figures. Average term of bonds
included is 25-26 years.
2/ Thursday figures. Only general obligation bonds are
includedj average term is 20 years.
3j Friday figures. Average rating of bonds included is
between Baa and A; average term is 20 years.
Note.--Highs and lows are for individual series and may
be on different dates for different series.




STOCK MARKET

Stock price
index 1/

Trading
, Common
stock
volume 2/
(millions yields 3/
of shares) (per cent)

Stock market customer credit
Customers1
debit bal- loans to
"others" 5/
ances V
(Millions of dollars)

1953 - High
Low
195U - High
Low
1955 - High
Low
1956 - High
Low

167.1 (1/2)
UiU.O (9/18)
221.lt (12/31)
.156.5 (1/6)
270.7 (12/30)
217. h (1/lit)
290.8 (it/6)
257.U (1/20)

2.5
0.9
3.7
l.li
k.6
1.5
3.1
1.6

5.75
5.15
5.33
a.20
It.22
3.78
It, 08
3.68

2,105
it,030
3,-537
it,01*7
3,991

May

280.1
275.5
280.1
286.1
289.2

2.h
1.8
1.8
2.0
2.3

3.97
3.82

it,0it7
It,009

n.a.

n.a.

June 29
July 6
July 13

2M5
2,055

3,136

1,665
1,3114.
2,388
1,653
2,805
2,517
2,810
2,7itO

780
66U
l,0lt8
7L6
1,2U1
1,018
1,267
1,217

2,810

1,237
1,223
1,223
1,231
n.a.

2,786

i available.
V SEC index of 265 common stocks, weekly closing prices, 1939*100; converted
to 19lt7-U9-100 by Federal Reserve. The conversion factor is 123.91.
2/ Averages of daily trading volume on the New York Stock Exchange.
3/ Moody's 200 common stocks; end,of month figures.
%J End of month figures for member firms of the New York Stock Exchange which
carry margin accounts; excludes balances secured by U. S. Government obligations.
$/ Wednesday figures for weekly reporting member banks. Excludes loans for
purchasing or cariying U. S. Government securities at banks in New York and Chicago.
Weekly reporting banks account for about 72 per cent of loans to others.
Note.—Highs and, lows are for individual series and may be on different dates
for different series.




H.ll*

Exhibit D
Corporate and State and Local Government
Security Offerings and Placements
(In millions of dollars)

1956
January
February
March

579
7 Oil
790

April
May
June

e/890
e/1,100
e/760

July
August
September

e/l,l50

-

1

Corporate
1955 - 1
535
1*07
1,223
1*78
886
687
597
61*1*

670
,

.

y

1,162 U
632
900

October
November
December
1st quarter
2nd quarter
3rd quarter
l*th quarter
Year

2,073
e/2,750

2,165
2,052
1,911
2,695
8,821

*

New capital
1954

1956

51*7
1*26
635

696

1*01*

State and local
1 1955
1 1951*
396
1*11
565

390

535
312
538

1*97
656 .
81*2

377
e/500
e/730

1*27
350
61+1

731*
71*8
853

909
335
7U7

e/UOO

1*70
21*9
1*06

279
261
61*9

919
658
1*08

591*
1*23
877

1,003
290
60U

1,608
1,995
. 1,991

1,U90
e/1,607

1,896

7,1*90

1,385
1,1*18
1,121*
1,981*
5,911

1,372
2,331*

1,188

1,891*
6,789

Excluding finance companies 2/
1st quarter
2nd quarter
3rd quarter .
l*th quarter
Year

1,617
e/2,55'0

1,727
1,870
1,1*31*
2,554
7,569

1,527
1,927
1,911
1,792
7,158

e/ Estimated.
1/ Includes $637•2 million AT&T convertible debenture issue.
2/ Total new capital issues excluding offerings of sales and personal finance
companies.
Note.—Details may not add to totals due to rounding.




Exhibit E
Large Public Security Issues for New Capital
(Other than U. S. Treasury) 1/
Proceeds of Large Issues Offered
(Millions of dollars)
Month
1955 - June
July
August
September
October
November
December
1956 - January
February
March
April
May
June

|

Corporate

State and
local government

175
101
105
328
805
221
263
95
212
278
395
623
185

U03
278
65
'

Other 2/

23b

716
101
227
192

25
50

163
157
233
163

50

Uhk

20

Large Individual Issues Offered July 1 through 13

£
Issuer

Type j/

Amount.
Coupon
(millions Maturity rate or Offering Rating
of
net inter- • yield
dollars)
est cost

CORPORATE
Florida Power Corp.
1st mtg. bds. 20.0
Pacific Gas & Electric Common stk. 36.6
Tennessee Gas Trans.
Deb.
30.0
American Tel. & Tel. Co.
Deb.
250.0

1986

3 7/8

3.82

A

1977
- 1990

h 1/2
3 7/8

U.50
3.73

Baa
Aa

STATE & -LOCAL GOVERNMENT
Commonwealth of Mass.
Puerto Rico Water Res.
Auth.

G.O.

38.5

Elec. rev. bds. 22.0

OTHER

#



1957-2005

2.63

1.90-2.80

Aa

1958-93

n.a.

2.60-3.75

Baa

E-2
n.a.—Not available.
1/ Includes corporate and other security offerings of $15 million and over; State and local government security offerings of $5
million;and over.
J2/ Includes foreign government and International Bank for Reconstruction and Development issues.
3/ In the case of State and local government securities, G.O.
denotes general obligation; Rev,, revenue bonds$ G.R., general obligations additionally secured by facilities revenues; L.L., limited
liability obligations secured by pledge of designated revenues.




H-lU

Exhibit F

Forthcoming Large Public Security Offerings for New Capital
(Other than U. S. Treasury) 1/
Expected Proceeds from Forthcoming Large Issues
During month following
Subsequent to
date shown
date shown
Corporate State and other 2/ Corporate State and Other 2/
local govt
-/
local govt.

Date of
computation
1955 - June 30
July 29
Aug. 31
Sept. 30
Oct. 31
Nov. 30
Dec. 30
1956 - Jan. 31
Feb. 29
Mar. 30
Apr. 30
May 31
June 30

3Wi
100
18k
81*3
330
205
121
327

6 7

,
1
*07

222

805
202

215
70
176
123

50

220

132
173
332
81

380

568
198
U37

830
1,135
920
909
1*12
230
85
376
233
1,013
818
m

567

1,81*5
2,018
1,971
2,205
1,650
756
618
917
785
811
832
9U1

50

690

Forthcoming Large Offerings, as of July 13
Issuer
CORPORATE

Type

Amount
(millions Approximate date
of dollars) of offering

:

Union Electric Co.
Superior Oil Co. of Calif.
J. P. Stevens & Co.
Inland Steel Co.
Illinois Power Co.
Sperry Rand Corp.

1st mtg. bds.
Deb.
S. F. deb.
1st mtg. bds.
1st mtg. bds.
Common stk.

1*0.0
45.7
28.7
50.0
20.0
52.7

Food Machinery and Chemical Corp.
Champion Paper & Fibre Co.
Michigan Wisconsin Pipe Line Co.
Consolidated Natural Gas Co.
CIT Financial Corp.
Pacific Finance Corp.

Deb.
. 'Deb.
1st mtg. bds.
Deb.
Deb.
Deb.

30.0
16.5
25.0
30.0
75.0
25.0

Rev.

16.0

July 17

G.O.
G.O.

5.5
ll*.0

July 17
July 18

July 17
July 18
July 18 3/
July 19
July 2l*
July 25
(rights expire)
July 26
July 26
August 1
Summer
1956
1956

STATE AND LOCAL GOVERNMENT
State of Michigan
Tulsa, Oklahoma, Independent
School District
Dearborn, Michigan, School District [




•H.lU

F-2
Forthcoming Large Offerings, as of July 13 (Cont'd)
Issuer

Type

Amount
Approximate date
(millions
of dollars) of offering

STATE AND LOCAL GOVERNMENT (Cont'd)
Maryland State Roads Commission
Jacksonville, Florida
Oklahoma City, Oklahoma
-^-Milwaukee Co., Wisconsin
New Jersey Highway Authority
New York State Thruway Authority
Jacksonville Expressway Authority
Florida State Turnpike Authority
Oklahoma Turnpike Authority
Pennsylvania Turnpike Commission
Washington State Toll Bridge Auth.
Inter-American Center Autiu, Fla.

G.O.
Elec. rev. bds.
G,0.
G,0.
Rev.
G.O.
Rev.
Rev.
Rev.
Rev.
Rev.
Rev.

15.0
11*.0
8.8
8.8
25.0
50.0
1*2.0 .
185.0
65.0
62.0
227.0
70.0

July 2h
July 2k
July 25
July 30
Summer .
Summer
September
Fall
1956
1956
1956
1956

OTHER
None
*—Included in table for first ime.
1/ Includes corporate and other issues of &15 million and over; State and
local government issues of $5 million and over.
2/ Includes foreign government and International Bank for Reconstruction
and Development issues.
3/ Postponed,as of July 18 "for the time being".