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Form F. R.*I31


Office C o r r e s p o n d e n c e

Mr» Eccles

Date J™> 28,1937


In connection -with your Treasury meeting.


Cc 32
June 28, 1957

Excess reserves
Member bank excess reserves increased by #60,000,000 during the
week ending June 23, reaching a total of 1810,000,000. This increase
was largely the result of disbursements by the Treasury from its deposits
with the Reserve banks.
It is expected that during the week ending June 30 excess reserves
will show a further slight increase. In increase in funds from net disbursements by the Treasury of about $70,000,000, and a decline in nonmember
deposits will be partly offset by a seasonal increase in money in circulation
which in this week may amount to $50,000,000.
It is estimated that money in circulation may increase by $130,000,000
between June 23 and July 3, and that this currency demand may reduce excess
reserves from the present level of $810,000,000 to about #750,000,000. After
July 3 the amount of currency in circulation will decline by at least il50,000,000, restoring excess reserves to about |900,000,000 by the end of the
Gold and capital movements
Gold imports have been in reduced volume compared with the first half
of the month. Recent additions to monetary gold stock have been as follows:
Week ending

Increase in gold stock
(millions of dollars)

June 5

40 (est.)

It is estimated that on June 26 the gold stock amounted to $12,290,000,000
and the inactive account to $1,060,000,000.





New York City banks
In the week ending June 25, holdings of Government securities by
New York City member banks declined by $120,000,000, reflecting principally
Treasury repayment of maturing bills• After this decline total holdings
of Governments by these banks were about the same as at the beginning of
Brokers1 loans at New York banks increased further, ty #50,000,000,
during the week. Interbank borrowings decreased*
Bond market
Treasury bonds and notes were generally unchanged last week. The average
yield on the longer-term bond issues was unchanged at 2.65 percent during
the week and that on S— to 5—year notes was about 1.57 percent most of the
Trading in the bond market last week remained at the very low levels
generally prevailing since the middle of May. Prices of high-grade bonds and
of mimicipals were off only slightly. Moody1 s average of Aaa bond yields
was 5.29 percent on Friday as compared with 5.27 percent a week earlier.
There was a continued decline in lower-grade corporate bond prices, lower—
grade railroad bonds losing nearly 2 points, and Moody1s Baa bond yield
average rose to 5.05 percent on Friday, higher than at any time since early
January 1956.
Despite the recent lack of strength in bond markets, the June aggregate
of new security issues is likely to exceed $450,000,000 which will be the
largest since the February total of $500,000,000. Last weekfs offerings





totalled about $130,000,000, as compared with $150,000,000 in the week
ended June 18* Municipal issues were again substantial and included a
$40,000,000 issue of New York State which was reported to have been reasonably
well distributed. Two moderately large refunding issues, of a telephone
company and a power company respectively, met with a good reception.
Stock market
Activity in the stock market, after increasing substantially in the
week ending June 19, declined again in the week ending June 26 to the low
level of other recent weeks—with sales approximating 540,000 shares r>er
day. Fluctuations of stock prices, as indicated by the daily Standard
Statistics index for 90 stocks, were relatively narrow, at a level slightly
above the low for the year reached about two weeks ago. Prices of railroad
stocks afoieh have been especially weak declined again and reached a new low
for the year on June 26.
The volume of foreign selling on the New York stock market declined
last week to a negligible figure. The French were consistent but light buyers.
Commodity prices.
Prices of grains advanced last week, and there was also an increase
in tin prices, accompanying a general rise in nonferrous metal prices abroad.
Cotton goods continued to decline, while prices of most other basic commodities
showed little change. Leading manufacturers of housefurnishings announced
further substantial price advances to become effective this autuim.
Federal budget deficit
Present indications are that the budget deficit, exclusive of debt
retirements, for the fiscal year 1937 which ends on June 30 will be about

— 4 —


$2,700,000,000 or |150,000,000 more than that shown in the official
estimates made public in April. Receipts are somev/hat larger than anticipated
but net repayments to the Reconstruction Finance Corr>oration and the Commodity
Credit Corporation have fallen short of the estimates*
are also higher than estimated•

Certain expenditures