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X-3211 FEDERAL RESERVE STATEMENT FOR THE BOARD 'PRESS For release in afternoon papers, October 3, 1921. Mond~, CONDITION OF TF.E ACCEPTANCE MABKET The following reports have been received from the Federal Reserve Banks concerning the condition of the acceptance market in their respective Districts: The demand for cowrr,ercial paper from the banks outside of Boston has been steadily increasing during the month and brokers• portfolios are fairly bare of the highest pTade names. While these ' are quoted at 5 per cent, that rate is hard to maintain and choicest names ha~e a tendency toward shading downward. The acceptance ll'ar- ke t has been rather dull, fewer bills being made and brokers carrying fairly large portfolios in anticipation of a falling rate. While there has been a fairly active demand for bills at 5 to 5-1/e ~er cent, dealers• listb a:!)::Jear on the market offering from 1 to 90 days bills at 4-7/8 and one dealer as low as 4-3/4. There has also been evidence that new funds have been turned into acceptances, when it has be3n founi impossible to invest them in the new Tre::.sury -03rti- t. - 2 X-3211 ficates, the offering of which on September 15th was oversubscribed. Offerings of acce~tances to the Reserve Bank have been very light and the Bank's holdings, including those carried for dealers, are at a low point, indicating the wide distribution of acceptances in the District. During the first two weeks of Septamber two of the dealers reduced their sellinq rates for prime bills of 30 to 90 d;,:::ys maturities 1/8 of one per cent, to 4-7/8 per cent .. As a result, chiefly, of these reductions the remaining dealers the following week made corres~jonding adjustments in their rates, and one dealer made a further reduction U1 his selling rate to 4-1/4 per cent. The ne«r level of sellin<I rates on Septer:ber 21 w2,s, therefore, 4-3/4 to 4-7/8 per cent, for all maturities up to four months. Dealers' buying rates for bills of these maturities ranged 1/8 of one ?er cent, hi!2h_er.. There were few six-roon ths bills in the mar- ket, due to quiet conditions in foreign trade. The lower bill rates were the reflection of generally easier money conditions rather than of an active demand for bills. Deal- ers reported that buying of bills was slow, but that the supply of bills was so li~ht that their portfolios were small. Dealers continued to find a steadier market with the country banks than with the banks in this city, and they cont:inu.ed to get new customers outside the city. ic,'~;-' - .J - 3X-3211 Of bills purchased by the dealers, sugar, grain, cotton, and dollar exchan~e bills preponderated. Offerings of grain bills con- tinued comparatively heavy, as in August and July, but there was some decrease in offe:r-inQ's of sugar end cotton bHls, and a fUt'ther decline in the volume of dollar exchange bills. Silk bills were also much less frequently offered. DISTiliCT NO. 3 (PHILAJ)!:_I,PEIA) The increase in foreign trade during August. in both exports and imports, is reflected in ·the total of acce~tances sold and in the total of those that period. exec~ted by the banks in this District during Four dealers, operating in this District, sold $8,149,000 as against $3.445,000 in July, an increase of 236 per cent. In August, 1920, although•.only some of these dealers were selling acceptances here at that time, the sales were $9,551,000. It should be noted, however, that the purchases of the Federal Reserve Bank of Philadelphia in that month, as shown by the table below, increased enormously, and in fact were far larger than ever before. Most of the acceptances sold by these dealers covered exports and imports of staple corrc.odi ties, chief a!'!1ong which were grain, cotton and sugar, in the order named. Warehousing transactions were next in importance. Rates were slightly easier, and owing to this, the demand has slackened and the supply has been adequate. Bank was by far the heaviest buyer~ This Federal neserve Comparison of its purchases for the past three months and for the corresponding months of 1919 and -4X-3211 1920 is shown in the following table: 1920 1921 $1,033,000 616,000 8,058,000 $4,000,000 1,4o3,000 4,303 .ooo 1919 June •• ... $135,000 July • • • • • • • 279,000 August • • 510,000 '1\Velve banks executing acce:ptaYJ.ccs in this District report an increase both in bills issued and in bills outstanding, as compared with the previous month. The following figures give the totals; for the past six months: Executed during preceding month 1921 $ 4,558,000 April May June July Outstanding on date given $13,234,000 12,892}000 10,793,000 9,286,000 8,757,000 9,009,058 5,611,000 2, 795,000 3,121,000 4,852,000 5,312,000 l;;~.:..gi1St September Of twenty-three reporting acce:pting banks, fourteen report acceptances executed for customers tc the amount of $5,416,1339 and the amount paid $5,999,443. The Federal Reserve Bank bought acceptances during August, 1921 amounting to $3,482,056; paid $2,886,966. During the past month there has been a decided improvement in the acceptance market, it being much the best month since February. The rates have remained stationary until the past few days when they dropped 1/8 of 1 per cent on all bills. The continued erratic character of the foreign exchange market and the further decline in some currencies was very noticeable in the supply of export bills. Of these, practically all were drawn against the exportation of motors and a very few arose out of the exportation - 5 - X-3211 of oils, tires and rr.achinery tools. By far the largest sup:oly of bills were drawn against domestic ship.nents of tractors and coal. An apprec- iable increase is noticed in :paper drawn against warehouse receipts. The sup~ly of such bills available were in the following order: coal, canned vegetables, wheat, evaporated milk, flour and oil with almost a third of these beinp coal bills. A lar?3r number of imnort bills were also available, all of which were drawn of paints and oils. a~ainst the importation The r;aturi ty of the bill has played little part in the usual demand during the past month. During the first two weeks of the month there was a greater demand for short time bills, but latar bills of posed of just as readily. lon~er maturities were dis- There has been a greater demend on the part of ¢ity banks and corporations, but at the same time the comtry banks, especially in the southern part of the District, have been heavy buyers in the acceptance market. .At times sufficient bills could not be secured to meet the demand which arose s~ltaneously from all classes of banks, as well as from all parts of the District. The dealers rates on prime bills are now 4-7/8 per cent on both short and long time maturities, and on other bills from 5 per cent to 5-1/8 per cent. 5 The fact that prime bills are now offered at less than per cent has brought about a noticeable decrease in the demand, and at the same time ve~ few bills are being originated. Jrr§TiiiCT NO. 6 (.ATLA}\IT.A} Little activity was reported in acceptance market conditions in this District during AuRUst. Thirteen accepting member banks replied to the - 6X-3211 monthly questionnaire for Au.c_'!l.l.s-1;, and most of these banks reported no dealings of any kind in accel_Jtances~ ances held un~:~old Four banks reported accept- in their own portfolios in amo'Wlts approximately the same, in the aggregate, as for the preceding month, while only two banks reported domestic acceptances executed during August, and three re~rts ! showed foreign acceptances executed during the month. The moving of agricu.l tural crops prevents the investment of large sums in acceptances or co!mlercial paper generally, except such paper as may be executed in connection with the marketing of cotton or other products. Open market purchases by the Federal Reserve Bank of Atlanta during .August were about 12 ;per cent less than in July and approximately 35 per cent less than in August 1920. DISTFICT NO. 7 ( CRICliGO) August reports from twenty-nine banks in the Seventh Fede:ral Reserve District, Show a marked increase over July in bills sold, and in bills held at the close of the month. A continued demand from corporations and individuals is repo:rted. Maturities of bills purchased in .August were divided as follows: 30 da.v, 24.9 per cent; 6o day, 12.4 per cent; 90 day, 60.9 per cent; 120 day, 0.4 per cent; and 180 day, 1.4 per cent. A comparison of returns shows an increase for Augu.st, as compared with July, of 21.8 per cent in bills bought; 42.7 per cent in bills sold; 80.5 per cent in bills held; and a decrease of bills accepted. 8.5 per cent in The greater part of the accoytances were drawn a~ainst • • - 1 - X-3211 meats, grain, and cotton. gg Banks Detailed comparisons f9llow: (In Thousands of Dollars) A:u.gus t July Bills bought •••••................ Bills sold•••••••...•.....•...•.• Held at close of nxmth ••........• .Amount accepted ••••• ·.••.........• $ 18,886 24,412 8,843 20,729 $ 15~500 17,101 4,899 22,651 Comparison of statistics of Bankers Acceptances at the Federal Reserve Batik of Chicago for July and August follows: During Month Au.gu.st Bankers acceptances rediscounted *Bankers acceptances bought ••••.• Bankers acceptances sold from holdin.gs •. ....... ·........... . 9,614,864 $ 5,000 None $7' ~55, 1CJ) 125,000 70,000 j Held at Clos~·ot Month Bankers acceptanc3s rediscounted *Bankers acceptances bo~t ••••.• 2,314 2,315,368 *Included in acceptances bought but not in acceptances sold, are those bought w1 th agree-.c.:ent by the sellers to repurchase within fifteen days. . .. DISTRICT NO. 8 (ST. LOUIS) The market for ,bankers• acceptances during the period under review developed a little more life than noted since the beginning of the sum- mer. While no such bills are originating in this District, a fair volume from the Eastem centers have been traded in by bal'lks in the St. Louis distr~ct. Quotable rates range between 5 and 6 per cent. DISTRICT NO. 9 (lVIINNE~POLIS) Bettfeen July and August, this Federal Reserve Bank increased its discounts of trada acceptances from $178,000 to $329,000. in .August A year ago $289,000 of trade acceptances were discounted. No trade ·' .. X-3211 - g- acceptances have been purchased by this Bank this year or last. No bankers acceptances were discounted by this Bank in August or July or in August a yeax ago, and no bankers acceptances or dollar exchange was purchased this year in August or July, but last year in August there were purchases of bankers acceptances to the amount of $475,000 and of dollar exchange to the amount of $50,000. The discount rates of this Bank for acceptances remained unchanged during August. DISTRICT NO- 11 (DALT~S} Outstsn1ing acce'lta."l.ces originating in the Eleventh District amounted to $956,751.39 on August 31st, a slight increase over the previous month. The transactions against which tl:ese acce~Jtances were draw.n were about evenly divided between foreign and domestic trade. There is still very little demand in this District for accept- ances as an investment rrediuro. It is believed, however, that the COITiing winter will see a material broadening in the local demand for this class of paper, especially if the recent improvement in the cotton market is maintained. DISTniCT NO .. 12 (SAN FHANCISCO) The improverr:ent ncted in the discount rr:arket for acceptance's last month has continued during the conth ending September 15th. This has been reflected not so much in a larger volume of sales as in a general broadening of the demand, which has spread slightly more in the Northwest. The southern section of California with a few not- able exceptions is still generally out of the market. With a slight revival of foreimn trade and the necessity for .r ~oving Coast cro:ps, the supply of bills originating in this ·District has l:lecoroe lar_crer.. This supnly has by no means, however, reached a "' .. - 9 - I iC'"''•• ..,. _L. X-3211 point sufficient to S'Uflply even a majority of the Coast demand for acceptances. Bills of four, five and six months duration are beginning to make their appearance in increasing n'Urnoers. After a. slight hesitancy, the market has begun to absorb this new type of acceptance with increasing feadiness, especially bills with a maturity of around 120 days .. The decline in the open market rate which started early in June has been arrested, at least terr.:porari\Y, and rates have been steady during the whole month at the following figures: 20 days 6o days ~9 da,ys Eligible member banks 5% 5% Eligible non-members 5~ 5~ ne~o~ts from show a total of 37 of the principal accepting banks of the District $3t377 )000 of bills accepted during August, $2,996,000 of acceptances purchased, and a total in portfolios at the end of the month of $4,075,000. Their re:9orts indicate that canned goods were the principal coi!Wio.di ty upon which acceptance transactions follow~d by were~ased, sugar, grains and miscellaneous import commodities from the Orient and Central Arne¢ca, chief among which was silk.. Six firms are reported to have drawn acceptances for the first time during the month.
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