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

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Not for Publication

DECONTROLLED AFTER SIX MONTHS

H.lU

March 16, 1959.
CAPITAL MARKET DEVELOPMENTS

The volume of public security financing for new capital was
substantial last week, but is expected to be much smaller this week.
During the week ending March 13, large corporate issues, including expiration of subscription rights, totaled $105? million and State and
local government bond offerings amounted to $153 million. The Federal
Land Banks also offered an $86 million issue. The calendar for this
week includes only one large corporate issue for $15 million and large
State and local government bond issues totaling $62 million.
Bond yields - Changes in yields on outstanding
mixed last week. Yields for high-grade corporate and U.
bonds increased somewhat, those for high-grade State and
ment and corporate Baa bonds remained stable, .and yields
State and local government bonds declined slightly.

bonds were
S. Government
local governfor lower-giade

A new Aa-rated first mortgage electric utility bond issue was
offered to investors last week to yield lwl|0 per cent—5 basis points
above that for the last comparable offering made in mid-Februazy. Both
issues included a 5-year nonrefunding provision.
Mortgage yields - Exhibits C and D include a new chart and
table showing monthly data on mortgage and bond yields which will be
included in this report once each month. Other data on current developments in mortgage financing will be presented in this space at other
times.
Yields on FhA and conventional mortgages have been stable
since late last year, while yields on new issues of corporate bonds have
declined. As a result, the differential between mortgage and bond yields
has widened. This spread, lltO basis points for FHA mortgages and li;7
for conventional mortgages, is considerably narrower than in the early
months of last year when the very wide differential led many investors
to acquire mortgages in preference to corporate securities.
Stock market credit - Customer credit in the stock market
(excluding that for U. S„ Government securities) declined slightly last
month for the first time since August 1958, totaling $U,527 million
at the end of the month. The February decline of $27 million in customer
credit resulted from a decline in net debit balances more than offsetting
the slight increase in bank loans to "others."




H.llt

- 2 -

Borrowing by member firms of the New York Stock Exchange maintaining margin accounts (excluding borrowing on U. S. Government securities) declined further last month. Customers' net free credit balances
declined $30 million (the first decline since last May), totaling $1,196
million at the end of February. These and other data on stock market
credit for February and January are shown in the following table.
End of month
Feb.
I Jan.
Customer credit
Excluding U. S. Government 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. Government securities

PUft n rrD
unange

(Millions of dollars)

Broker and dealer credit
Money borrowed except on U. S. Government securities
On customer collateral
Money borrowed on U. S. Government securities
Customers' net free credit balances

4,527
3,253
1,27k
157

ki$5k
3,297
1,257
155

+17
+2

-27

62

65

-3

1,963
1,722
223
1,196

1,990
1,741
230
1,226

-27
-19
-7
-30

-a

Stock prices - Stock prices, as measured by Standard and Poor's
index of 500 common stocks, increased further last week, closing at 56.6?
on March 13. Trading activity continued to be very heavy, averaging U.2
million shares a day.
More detailed information concerning recent capital market
developments is presented in the attached exhibits.

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




17

HIGH-GRADE

BOND

YIELDS

• .

r"

L J
LOWER-GRADE

BOND

YIELDS




,

fcxii.i bit It
Tables i'or Exhibit A
liigh-grade bond Yields

Date

U. S. Govt,
long-term 2/

Corporate
Aaa 1/

Spread between
U. S. Govt, and
Corporate 1 State and
Aaa
1local Aaa

State and
local govt.
Aaa y

(Per cent)
195b - Low
195? - High
1958 - High
Low
1959 - High
Low

2.85
h.lh
li.13
3.55
k.16
2u09

Feb.
Feb.
Feb.
Mar.
Mar.

U.lh
h.lk
1*.13
Ji.llii.13

13
20
27
6
13 2/

(U/23)
(9/27)
(10/10)
(5/2)
(1/30)
(1/9)

2.L5
3.76
3.81
3.07
3.96
3.83

(8/6)
(10/18)
(12/26)
(ii/25)
(1/16)
(1/2)

1.90
3.U5
3.31
2.6U
3.20
3.06

(9/2)
(8/29)
(9/11)
(5/1)
(2/5)
(3/12)

3.18
3.13
3.11
3.06
3.06

3.92
3.91
3.90
3.87
3.92

.30
.60
.51
.22
.27
.16

.30
.1*7
.72
.31*
.86
.65

.22
.23
.23
,2h
.21

.71*
.78
.79
.81
.86

Lower-grade Bond Yields
Corporate
Baa 1/

State and
local govt.
Baa y

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

3.1*1*
5.10
1*.96
1*.51
lt.90
1*.85

2.93(8/5)
•U.Si (8/29)
l*.3lt (9/11)
3.61* (5/1)
L 1 3 (2/5)
3.93 (3/12)

Feb.
Feb.
Feb.
Mar.
Mar.

'1*.90
1*.89
It. 89
4.87
U.87

Date

Spread between
Aaa and Baa
State and
local govt.

Corporate

(Per cent)

13
20
27
6
13 2/

(12/31)
(11/29)
(1/3)
(7/11)
(2/13)
(1/9)

l*.ll

l*.o5

1*.03
3.95
3.93

.52
1.27
1.20
.77
.77
.71*
.76
.75
.76
.76
.71*

.

.96
1.21
1.11
.93
.98
.87
.93
.92
.92
.89
.87

2/ Preliminaiy.
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.
jj/ Thursday figures. Only general obligation bonds are included5 average term
is 20 years.
Note.—highs and lows'"are for individual series and may be on different dates for
different series.




STOCK MARKET

jZZ

MORTGAGE

AND

BOND




YIELDS

we,

Exhibit D - Tables for Exhibit C

Date

Stock price
index 1/

1953-1958 - High
Low
1959 - High
Low

52i.ll
22.95
56.6?
54.37

January
February
Feb. 27
Mar. 6
Mar. 13 2/

55.82
54.77
55.41

(12/26)
(9/18)
(3/13)
(2/6)

56.21

56.67

1

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

Stock market customer credit
Customers»
Bank
debit bal- loans to
ances 4/ "others" $/
(Millions of dollars)

Total

3.30
6.25
3.21
3.34

4.9
0.9
4.2
3.0

4,488
2,055
4,554
4,527

3,281
1,314
3,297
3,253

1,317
664
1,274
• 1,210

3.24
3.32
3.29
3.24
3.21

4.0
3.5
4.1
4.2
4.2

4,554
4,527

3,297
3,253
n.a.
n.a.
n.a.

1^257
1,274
1,274
1,270

n.a.
n.a.

n . a . — N o t available.
2i Preliminary.
l/'Standard and Poor'a composite index of 500 common stocks, weekly closing prices, 1941-43=10. Monthly data
are averages of daily figures rather than of Fridays' only. Highs and lows are for Fridays' data only.
2/ Standard and Poor's composite stock 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 daily trading volume on the New York Stock Exchange.
4/ End of month figures for member firms of the Hew York Stock Exchange which carry margin accounts; excludes
balances secured by U. S. Government obligations.
5/ Wednesday figures for weekly reporting member banks. Excludes loans for purchasing or carrying U. S, Government securities at banks in New York and Chicago, Weekly reporting banks account for about 70 per cent of loana to
others. For further detail see Bulletin.

Mortgage and Bond Yields
Date

Spread between new corporate
Aaa corporate
bonds and 6/
bonds 1/
FHA 2/|Conv.3/ New k/1 Seasoned 5/ FHA mtgs.|CJonv. mtgs.|Seasoned bonds
Mortgages 1/

1953-1958 - High
Low
1959 - High
Low

5.74
4.46
5.70
5.69

5.99
5.14
5.76
5.76

4.81
2.74
4.36
4.29

4.11
2.85
4.14
4.12

2.07
.64
1.40
1.34

2.54
.99
1.47
1.40

1958 - Oct.
Nov.
Dec.
1959 - Jan.
Feb.

5.67
5.70
5.70
5.70
5.69

5.74
5.76
5.76
5.76
5.76

4.49
4.35
4.44
4.36
4.29

4.11
4.09
4.08
4.12
4.14

1.19
1.35
1.26
1.34
1.40

1.26
1.41
1.32
1.40
1.47

.90
-.12
.24
.15
"

.37
.26
.36
.24
.15

1/ Neither mortgage nor bond yields take into account servicing costs which are much higher for mortgages
than bonds.
2/ Computed by Federal Reserve from p-verege prices reported by FHA, assuming loans are paid off in 8 years.
Beginning January 1956, the series includes 10 per cent down, 25-year mortgages only. Dashed lines-indicate periods
of adjustment to changes in the contractual interest rate. Data for the first half of 1953 are less reliable than
later data.
3/ Computed by FHA from typical rates.
4/ first National City Bank of New York.
Averages of offering yields of all new issues of publicly-sold bonds
rated Aaa, Aa or A by Moody's Investors Service (except serial and ^convertible issues and offerings of natural gas and
foreign companies) weighted by size of issue. Yields on Aa and A issues are first adjusted to an Aaa basis by the
spread between yields of outstanding bonds in these categories and those on Aaa-roted bonds. The series reflects
changes in industrial composition, maturity, type, etc. of new offerings.
5/ Moody's Investors Service, Monthly averages of daily data. See Exhibit B.
6/ High indicates widest spread and low. narrowest spread.
Note.—Highs and lows are for individual series and may.be on different dates for different series.




Exhibit E

H.14

Long-tera Corporate and State and Local Government
Security Offerings and Placements
(In millions of dollars)

111

1959
January
February
March

New capital
Corporate 1/
State and local 2/
1959
1
1
195b
1957
1957
1
1958
1
723

1,060
1,065
1,320

E/629

812

742
572
506
765
546
393

H/%

kpril
May
June

I,l4l
600
881

1,453

%

798
895
551

July
lugust
September

1,102
538
1,144

1,003
924
973

806
403
651

1

858
1*73
91k

1,090
789
1,076

456
474
435

698
633
698

3,132
2,622
2,784
2,250

3,416
3,149
2,899
2,954

2,276
2,244
1,860
1,365

1,820
1,704
1,544
2,029

5,757
8,5kl
10,791

6,594
9,493
12,447

4,520

3,524
5,069
7,099

Dctober
November
December
Lst
2nd
Jrd
tth

quarter
quarter
quarter
quarter

e/2,082

.st half
*hree quarters

e/2^21

Excluding finance companies 4/
st
nd
ird
th

quarter
quarter
quarter
quarter

ear

2,89k
2,161

3,237
2,889
2,582
2,810

10,391

11,518

a/1,882

e/ Estimated
__
1/ Securities and Exchange Commission estimates of net proceeds.
2/ Investment Bankers Association of America estimates of principal amounts.
3/ Includes #18.3 million AT&T convertible debenture issue.
4/ Total new capital issues excluding offerings of sales and consumer finance
ompanies.




Exhibit F

H.Ik

Other Security Offerings 1/
(In millions of dollars)
Long-•term
Foreign government 2/
Federal agency' 3/
1959
1 1958
1959
1 1956
1
I 1957
1957
January
February
""March -

77

196
53

84
49
30

199

1,163
251

72

523

125

139
198
120

iS

9
5
17

28
7
30

16k

October
November
December

58
123
74

4
60
1

220

Year

992

507

2,321

April
May
June
July
August
September

Short-1
State and local government 4/
January
February
March

233
460
273

326
155
147

April
May

357
3 54
261i

July
August
September
October
November
December

E/189

Year

60

42

215
100
572

Federal agency 3/
371
208
Ikk

638
430
565

205
337
153

209
161
329

469
501

289
123
369

272
272
252

437
206
330

231
415
243

459

%

454
114
137

1,238
255
116

3,098

5,543

3,910

3,27k

270
500

'

224
370
512

1/ Data presented in this exhibit differ from those in Exhibit E in that refunding 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.
3/ Issues not guaranteed by the U. S. Government. Source: long-term, Securities
and Exchange Commission; short-term, Federal Reserve.
4/ Principally tax and bond anticipation notes, warrants or certificates and Public
lousing
Digitized
for Authority
FRASER notes. In some instances P&A notes included may have a somewhat
:onger term than one year. Source: Bond Buyer.



Exhibit G

H.14

Large Long-term Public Security Issues for New Capital
(Other than U. S. Treasury) 3/
Proceeds of Large Issues Offered
(Millions of dollars)

Corporate

Month

1958 - February
March
April
May

State and
local government

605
1,093
725
356
281
771
209
825
259
227
305
369
340

July
August
September
October
November
December
1959 - January
February

Other 2/

266

553
182
300
505
195
275
109
288
172
259
229
335
551

653
164
86
41
18
209
100
79
174
" 35

Large Individual Issues Offered March 1 through 13

Issuer

Type ]/

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

Rating

CORPORATE
25.0
No. Indiana Pub. Serv. Co. 1st ntfcg. bds.
Conv. sub. deb. 18.5
KLM Royal Dutch Airlines
American Natural Gas Co.
Com. stk.
28.0
Colorado Interstate Gas Ccx 1st mtg.p.l.bds.33.0

4 1/2

l*.i*0

1989
1979

4 3/4

4.75

1979

4.70

4.67

Aa

STATE AND LOCAL GOVERNMENT
Detroit-Metro. Expressway
Philadelphia, Pennsylvania
Port of New York Auth.
New York, N. Y.
Metro.Wtr.Dist.of So.Cali£
State of California

Rev.-S.T.
G.O.
Rev.-Ut.
G.O.
Rev.-Ut.
G.O.

25.0 1960-81
25.5 1960-89
30.0 1989/68
26.3 1960-74
26.4 1960-71
100.0 1960-84/79

3.5k
3.27
3.68
3.17
2.96
3.55

1.90-3.65, , A
1.85-3.U2* A
3.63
A
1.90-3.37
A
1.90-3.05
Aa
1.90-3.60
Aa

OTHER
Federal Land Banks

Farm loan bds.




86.0

1968

it 1/4

4.35

H.lii
Footnotes
1/ Includes corporate and other security offerings of §15 million and over3
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.
3/ 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 from specific taxes only; Rev.-Rent.,
revenue bonds secured solely by lease payments.
k/ 1987-89 maturities not reoffered.




Exhibit H

H.U*

Forthcoming Large Long-term Public Security Offerings for New Capital
(Other than U. S. Treasury) 1/
Expected Proceeds from Forthcoming Large Issues
Date of
computation

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

During month following
date shown
Corporate
1,123
555
356
266
768
161
785
113
20k
301
210
270
198

Subsequent to
date shown

^ J o t h e r 2/

.

131*
298
1*93
177
225
55
2la
295
258
229
261
551
292

Corporate

110
150
36

71
75
1*5

1,208
670
561
1*61*
1,01*8
381
911*
216
326
1*01
370
365
279

^

J Other 2/

31*1
330
1*93
208
235
125
1*35
521*
675
683
' 515
856
1*81

110
150
36

71
75
1*5

Forthcoming Large Offerings, as of March 13
•type

Amount
Approximate date
(millions
of offering
of dollars)

CORPORATE
Texas Eastern Trans. Corp.
Cleveland Electric Illuminating Co.
Montana Power Co.
Ohio Edison Co.
Ohio Power Co.
Monongahela Power Co.
*Armco Steel Corp.
Food Fair Stores, Inc.
Columbia Gas System, Inc.
Commerce Oil Refining Corp.

Pfd. stk,
1st mtg. bds.
1st mtg. bds.
1strafcg.bds.
1st mtg. bds.
1st mtg. bds.
S.F. deb.
Conv. sub. deb.
Common stk.
Deb., bds. & common

15.0

Mar. 20
Mar. 25
Mar. 25
30.0 Mar. 26
25.0
Mar. 31
16.0
Apr. 1
Apr. 2
75.0
21.8
Apr. 10
(rights expire)
iiO.O
Apr. 20
(rights expire)
Spring
45.0

25.0

20.0

STATE AND LOCAL GOVERNMENT
Phoenix, Arizona
West Virginia University
Baltimore, Md.
State of Delaware
Milwaukee, Wisconsin
Pennsylvania General State Auth.




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

10.0
10.2
28.9
12.5

18.8
30.0

Mar.
Mar.
Mar.
Mar.
Mar.
Mar.

17
17
17
18
31
31

H.lh
Forthcoming Large Offerings, as of March 13 (Cont'd)

• Issuer

Type

Amount
Approximate date
(millions
of offering
of dollars)

STATE AND LOCAL GOVERNMENT (Cont'd)
•^Shelby Co., Tennessee
Los Angeles Sch. Dists., Calif.
^Alabama Highway Authority
Buffalo, New York
^Florida Development Comm.
*State of Minnesota
Chesapeake Bay Ferry Commission
State of New Jersey
Memphis, Tennessee

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

11.0
27.0
20.0
10.2
25.0
12.0
lhh.O
25.0
10.0

Mar. 31
Apr. 7
Apr. 7
Apr. 9
Apr. 9
Apr. lit
Spring
Spring
Spring

None
~

*—Included in table for first time.
1/ Includes corporate and other issues of $15 million and over; State and
local government issues of $10 million and over.
s,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.




H.lU

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

Date

1952 - 1957
High
Low

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(9/14/57)
2.93(3/31/54)

1958 - January
February
March
April
May
July 2
9
18
23
Oct. 7
15
28
29
Dec. 17
1959 - Jan. 7
20
28
Feb. 18
Mar. 11

87
-3

*3.60,/
3.89^
4.08
3.91
3.87
3.87

-8
22
35
18
18
17

4.oo
4.10
4.10
4.57
4.50
4.40 /
4.42^
4.44

25
28
29
25
22
12
14
23

4.6o
4.65?/

34
4o

Wo2/

ii

5.50(11/7/57)
3.00(3/17/54)
3.962/
>.07
4.16
4.01
4.07

^

123
-15
3
9
-1
8
6
"

4.35^

31

4.75^

23

*—Single observation, not an average.
1/ Covers only 30-year first mortgage bonds, as reported in Moody1 a 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.