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STRICTLY CONFIDENTIAL

BOARD OF GOVEWOBS
OF THE
FEDERAL RESERVE SYSTEM
November 5 , 19U3
Chairman E c c l e s
L . M. P i s e r

Purchase of short-tem securities

The System Account has recently been purchasing a large amount of
short-term tax-exempt securities as well as certificates, as shovm in the attached table.

I talked v/ith Kr. Rouse this morning concerning these purchases,

since the yields after taxes on most of these partially tax-exempt issues
are as low as the yields after taxes on the certificates.

He said that the

earlier purchases of both kinds of issues were made for the purpose of relieving seme of the pressure on the b i l l market.

In addition, he thought

i t desirable to purchase these issues, because they may be given rights to
exchange for

2 per cent bonds.

The more recent purchases were made to re-

move from the market a supply that dealers were finding i t impossible to
sell.

I suggested that by paying present prices he might be encouraging

investors to s e l l .

He said that in one instance he had purchased guaranteeds

that an investor was selling in order to switch to certificates, and he
said further that perhaps he had gone too far in supporting the prices of
the partially tax-exempt securities.




STRICTLY CONFIDENTIAL

- 2 -

November 5 , 19^4-3

Week ended

Oct. 27

Nov. 3

Nov. 10
(to dateQ

-700
+3,000
+25,000
+5,000
__

—

+10,200
+1,000
+19,700

-12, 500
+19, 800

+30.. ,900

Certificates}
December 1
February 1
April 1
Kay 1
August 1
October 1
Total c e r t i f i c a t e s

+3,900
+1+7,100
+2J+,2OO
—
—
- 2 , 000
+73, 200

mm mm

—

Treasury notes*
Sept.

- 1 , 500

Treasury bondsj
+1,900

94+5U

I9I16-56

+750

FFMC:
19W4.-I19

+1,000
+3,236

+750

HOLC:
+700

Total partially tax-exempt




+9,886

+3,100

+11,050

+6,500