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X-3257 F F D E R 6 T. R F S ^ P 7 E BOARD STATEMENT FOR THE PRESS For r e l e a s e i n a f t e r n o o n p a p e r s , F r i d a y , December 2 , 1921. CONDITION OF THE ACCEPTANCE MARKET The f o l l o w i n g r e p o r t s have been r e c e i v e d from t h e F e d e r a l Reserve Banks, concerning t h e c o n d i t i o n of the acceptance market i n t h e i r r e spective D i s t r i c t s : DISTRICT NO- 1 (BOSTON) Another r e f l e c t i o n of t h e s e e a s i n g t e n d e n c i e s i n the money market i s v i s i b l e i n the unabated demand f o r b a n k e r s 1 acceptances, especially by i n s t i t u t i o n s and c o r p o r a t i o n s which are t e m p o r a r i l y i n f u n d s seeking l i q u i d investments. The 30 day m a t u r i t y i s sought p r i n c i p a l l y . The demand f o r t h i s c l a s s of a c c e p t a n c e s i s f r e q u e n t l y g r e a t e r t h a n the supply. Following the almost simultaneous r e d u c t i o n i n t h e d i s c o u n t r a t e of a l l of the F e d e r a l Reserve Banks e a r l y i n November, the going r a t e on prime b a n k e r s 1 a c c e p t a n c e s promptly f e l l t o 4 - 3 / 8 p e r c e n t or l / 8 p e r c e n t below the d i s c o u n t r a t e o b t a i n i n g at t h e F e d e r a l Reserve Banks of Boston, New York and P h i l a d e l p h i a . - 2 - X-J257 The l a s t 10 days i n October show t h e l a r g e s t amount of s a l e s of 30 day " b i l l s recorded i n t h i s D i s t r i c t f o r over a y e a r , t h i s p e r i o d b e i n g a l s o marked b y t h e i s s u a n c e of a f a i r amount ot 15 day b i l l s c o v e r i n g sugar i m p o r t a t i o n s from Cuba* Following November 1, t h e demand is goou. w i t h numerous i n q u i r i e s f r o m c o r p o r a t i o n s and c o u n t r y banks* banks appeared in the market f o r moderate amounts of b i l l s * Savings The e x c e l - l e n t market c o n d i t i o n s prompted d e a l e r s t o c a r r y l a r g e r p o r t f o l i o s i n Boston, drawing on the s u r p l u s of b i l l s which were b e i n g c a r r i e d by t h e i r New York o f f i c e s , the i n c r e a s e of b i l l s being r e q u i r e d t o meet the q u i c k demand of the p u r c h a s e r s * At t h i s w r i t i n g (November 18) the supply of b i l l s s l i g h t l y exceeds t h e demand w i t h s a l e s somewhat l e s s t h a n d u r i n g t h e p r e c e d i n g week and the trend running more t o the c i t y banks» i s a l s o a n o t i c e a b l e i n c r e a s e i n the holdings of t h e d e a l e r s . There It is re- corded t h a t Boston banks have reduced t h e i r p a r r a t e s on n o t e s secured by a c c e p t a n c e s f r a n 5 ~ l / 2 t o 5 p e r c e n t * This a p p e a r s t o r e f l e c t i t s e l f i n the s m a l l e r number of b i l l s which the F e d e r a l Reserve Bank of Bostpn i s c a l l e d upon b y the d e a l e r s t o c a r r y . The b i d r a t e s b y a l l d e a l e r s i n Boston f o r prime b i l l s a r e now 4 - 3 / 8 and the o f f e r i n g r a t e s 4 - 1 / 4 p e r cent There seems t o be an o v e r - s u p p l y of c a l l money f o r g e n e r a l s t o c k exchange c o l l a t e r a l which may r e f l e c t i t s e l f i n an i n c r e a s e d demand f o r b i l l s Our own p o r t f o l i o , while i t has been a t a h i g h e r p o i n t than d u r i n g the p r e v i o u s ironth, i s now a t about the p o i n t where t h e month opened. We are c a l l e d upon t o make b u t few p u r c h a s e s on our own account a s our r a t e s have been s l i g h t l y l e s s f a v o r a b l e t o the s e l l e r than could be o b t a i n e d t h r o u g h the d e a l e r s * - 3 - X-3257 DISTRICT NO. 2 (HEW YORK) During November, d e a l e r s found i t n e c e s s a r y to lower b i d r a t e s "by s u c c e s s i v e s t a g e s from U—3/^ t o f i c i e n t supply of b i l l s . p e r cent i n order t o o b t a i n a s u f - S e l l i n g r a t e s were lowered i n p r o p o r t i o n and by the middle of t h e month were 4 - l / 4 p e r cent f o r a l l m a t u r i t i e s up t o f o u r months, as compared w i t h *-!— 1 / 2 p e r c e n t a t the c l o s e of October» Demand f o r b i l l s i n c r e a s e d m a t e r i a l l y f o l l o w i n g the r e d u c t i o n i n F e d e r a l Reserve d i s c o u n t rates• I n t e r i o r banks bought i n s u b s t a n t i a l volume and p u r c h a s e s by New York banks and l a r g e c o r p o r a t i o n s were g r e a t e r than in October. Demand was most a c t i v e f o r b i l l s which would mature b e f o r e the end of the year# supply of b a n k e r s 1 The b i l l s o f f e r e d i n New York i n c r e a s e d somewhat e a r l y in the month as a r e s u l t of s e v e r a l l a r g e o f f e r i n g s of sugar import s y n d i c a t e paper* These o f f e r i n g s , coming when the demand was p a r t i c u l a r l y good, were q u i c k l y absorbed b y i n v e s t o r s and l a t e r in the month the supply of b i l l s was i n s u f f i c i e n t t o meet the demand. Cotton, g r a i n , and s i l k b i l l s were n e x t t o sugar b i l l s i n o r d e r of importance i n the month's n e w - o f f e r i n g s . DISTRICT NO- 3 (PHILADELPHIA Ai i n c r e a s e i n t h e supply of b a n k e r s * a c c e p t a n c e s has served to make i t more n e a r l y e q u a l t o t the demand. S a l e s of f o u r d e a l e r s d u r i n g October to banks i n the Third F e d e r a l Reserve D i s t r i c t i n c r e a s e d 45 p e r c e n t over those of September, b u t s a l e s of t h r e e d e a l e r s d i s t r i b u t e d t h r o u g h o u t the country declined slightly* I m p o r t a t i o n of s u g a r , e x p o r t a t i o n of c o t t o n and f o o d s t u f f s , and warehousing of s u g a r , c o t t o n and tobacco were the t r a n s a c t i o n s which gave r i s e t o a l a r g e p r o p o r t i o n of the b i l l s executed l a t e l y * The t o t a l s f o r 12 banks l o c a t e d i n t h i s D i s t r i c t show an i n c r e a s e i n the a^iouut of b i l l s accepted and b i l l s o u t s t a n d i n g * The amounts executed a r e l a r g e r t h a n t h e y have been x-3257 - 4 a t any time s i n c e our r e p o r t s were s t a r t e d l a s t March. B a n k e r s ' .Acceptances Executed. 1921 - November 10 October 1 0 . . September 10 iugus t 10. J u l y 10. June 10. Executed d u r i n g p r e c e d i n g month Outstanding on date given. $6,325,000 $11,224,000 4,507,000 5,312,000 4,852,000 3,121,000 2,795,000 9,902,000,, 9,009,000 8,756,000 9,286,000 10,798,000 The lowering in t h e d i s c o u n t r a t e s of t r e F e d e r a l Reserve Banc:s and t h e lowe r y i e l d of r e c e n t i s s u e s of Government c e r t i f i c a t e s have been leading f a c t o r s i n b r i n g i n g down the r a t e s f o r a c c e p t a n c e s . The s e l l i n g r a t e on e l i g - i b l e members' b i l l s i s now 4 ~ l / 4 p e r c e n t , as compared w i t h 4 - l / 2 p e r cent l a s t month; and f o r non-members, 4 - 3 / g p e r c e n t as a g a i n s t 4 - 5 / 8 a t t h a t t ime. DISTRICT NO. 4 (CLEVELAND) Bankers 1 • acceptances bought by the Federal Reserve Bank of Cleveland d u r i n g October, 1921,.amount t o $ 4 , 4 8 3 , 3 ^ * and those maturing and p a i d , t o t a l $3,209,471. Nineteen a c c e p t i n g banks i n the Fourth D i s t r i c t r e p o r t a c c e p t a n c e s executed d u r i n g October as $3»6l4,903, and a c c e p t a n c e s p a i d , as *4,760,553- The undertone of t h e acceptance market f o r the f i r s t h a l f of the p a s t month was somewhat b e t t e r w i t h s l i g h t improvement i n the t u r n over i n comparison w i t h t h e p r e v i o u s month. were b u y e r s . sources. Country banks i n some s e c t i o n s There was a l s o some demand from c o r p o r a t e and i n d i v i d u a l Rates have tended t o d e c l i n e throughout the month i n sympathy w i t h t h e e a s i e r c a l l money r a t e s and the i n c r e a s i n g supply of s h o r t time demand f u n d s . The g e n e r a l i n a c t i v i t y of the acceptance market i n the p a s t months and the supply and demand of prime b i l l s have had l i t t l e e f f e c t in - 5 t h e s e t t l i n g of the hank acceptance r a t e s « X-3257 The r a t e s have t e e n determined, r a t h e r by r a t e s on s h o r t time f u n d s i n the o t h e r m a r k e t s . inated in this District* Few b i l l s o r i g - Much of the supply o f f e r e d by t h e b r o k e r s was p a r t i c i p a t e d i n by banks f r c e ^ t s m s y n d i c a t e s . No n o t i c e a b l e improve- ment appeared i n t h e supply of b i l l s drawn a g a i n s t f o r e i g n t r a n s a c t i o n s . However, t h e r e was a s l i g h t improvement i n the s u p p l y of p a p e r drawn a g a i n s t domestic shipment. As i n the p r e v i o u s month, t h e r e was a g e n e r a l d e c r e a s e i n b i l l s drawn a g a i n s t warehouse r e c e i p t s - The p r e s e n t r a t e s f o r prime b i l l s , e l i g i b l e f o r r e d i s c o u n t by the F e d e r a l Reserve Banks, a r e as f o l l o w s % Under 30 days 30 t o 60 days GO t o 90 days 4 - l / 4 t o 4-1/2 4 - 1 / 4 t o ,ty-l/2 4 - l / 4 to 4-1/2 DISTRICT NO. 6 (ATLWrfl) E i g h t e e n r e p o r t s r e g a r d i n g a c c e p t a n c e t r a n s a c t i o n s d u r i n g October 1921, member were r e c e i v e d from a c c e p t i n g / b a n k s i n the S i x t h D i s t r i c t , t e n of which i n d i c a t e d no t r a n s a c t i o n s of any kind d u r i n g t h e month. Domestic acceptances e x e c u t e d d u r i n g October were 15-9 p e r c e n t l e s s than were executed d u r i n g September, b u t 56.0 p e r c e n t more than d u r i n g October 1920. Foreign accept- ances executed d u r i n g October were 26-3 p e r c e n t l e s s than d u r i n g September, and 3 0 . 1 p e r c e n t l e s s than October 1920. Acceptances purchased i n t h e op°n market by t h e F e d e r a l Reserve Bank d u r i n g October were about 2 4 . 3 p e r c e n t l e s s than d u r i n g the p r e c e d i n g month, b u t were 3 0 . 9 p e r c e n t g r e a t e r than were bought i n October 1920. With the e x c e p t i o n of September, t h i s item was l a r g e r i n October than d u r i n g t h e p a s t n i n e t e e n months. DISTRICT WO. 7 (CHICAGO) R e t u r n s from r e p o r t i n g banks i n the Seventh F e d e r a l Reserve D i s t r i c t - 6 - x-3257 show i n c r e a s e s i n b i l l s accepted, and b i l l s s o l d f o r October, as compared w i t h September, The g r e a t e r i n c r e a s e was i n b i l l s accepted which was ^3»1 P e r c e n t * Decreases are shown i n b i l l s bought and i n b i l l s h e l d a t t h e c l o s e of t h e month. During the two p r e c e d i n g months t h e r e were de- c r e a s e s i n b i l l s b o u g h t , s o l d , and a c c e p t e d , and i n c r e a s e s i n b i l l s h e l d a t the c l o s e of t h e month. Purchase r a t e s f o r October were r e p o r t e d as r a n g i n g from U-l/2 t o 6 p e r c e n t , a l t h o u g h most of t h e r a t e s r e p o r t e d were l e s s than 5 per c e n t . The m a t u r i t i e s of b i l l s p u r c h a s e s were d i v i d e d a s f o l l o w s : 3 0 - d a y , 1«9 p e r c e n t ; 60~day, 9 - 6 p e r c e n t ; 90-day, 8 6 . 1 p e r c e n t ; and ISO-day, 2 . 4 pei* c e n t . The g r e a t e r p a r t of t h e b i l l s was r e p o r t e d drawn a g a i n s t meats'; wheat, and c o t t o n . A d e t a i l e d sum-nary of t h e r e t u r n s of 29 r e p o r t i n g banks i s as f o l l o w s : • B i l l s bought." ••Bills sold.. B i l l s h e l d a t c l o s e of month Amount accepted October $6,905,000 11,699.000 6,551,000 16.S65.000 September $7,858,000 16,525,000 6,728,000 11,800,000 * E x c l u s i v e of b i l l s purchased by t h e a c c e p t i n g b a n k s , and of p u r c h a s e s f o r the account of s p e c i f i c c u s t o m e r s . ** E x c l u s i v e of b i l l s purchased f o r the account o f , and s o l d t o , s p e c i f i c customers. One b r o k e r r e p o r t s t h e buying demand as s l u g g i s h , due t o low r a t e s of r e t u r n a s opposed t o prime commercial p a p e r . One l a r g e r e p o r t i n g bank s t a t e s t h a t the d i s c o u n t market i s working more e a s i l y , w i t h no s u r p l u s f u n d s y e t a v a i l a b l e f r o m b a n k s , c o r p o r a t i o n s , and i n d i v i d u a l s f o r investment i n a c c e p t a n c e s . Comparison of s t a t i s t i c s on b a n k e r s ' a c c e p t a n c e s a t t h e F e d e r a l Reserve Bank of Chicago f o r September and October f o l l o w s : - 7Bankers Acceptances re&iscountecL . * •Bankers Acceptances "bought - . . . . . . Bankers -Acceptances sold from h o l d i n g s . * . X-3257 $ September None October 175,000 $6,665,112 10,626,197 25,coo 270,000 Held a t c l o s e of month Bankers Acceptances r e d i s c o u n t e d •Bankers Acceptances "bought None None $2,849,396 $ 3,427,354 * Included i n Acceptances Bought, b u t n o t i n Acceptances Sold, a r e those bought w i t h agreement by the s e l l e r s t o r e p u r c h a s e w i t h i n f i f t e e n days* DISTRICT NO, 8 (ST. LOUIS) The market f o r b a n k e r s ' a c c e p t a n c e s d u r i n g the p a s t t h i r t y days has developed, more a c t i v i t y than f o r the l a s t few months. Corporations hold- i n g i d l e money and d e s i r i n g a q u i c k l y c o n v e r t i b l e i n v e s t m e n t , have p u r chased f a i r arr.outnts, and c i t y banks have a l s o f i g u r e d as b u y e r s . Virtually a l l the b i l l s i n c l u d e d i n t h e s e t r a n s a c t i o n s have emanated from o u t s i d e the District. Rates on a c c e p t a n c e s r e f l e c t the g e n e r a l l y e a s i e r tendency of money, ranging from 4 - 3 / 8 t o 4 - 5 / 6 p e r c e n t . DISTRICT NO. 9 (MINNEAPOLIS) During the month of October no d o l l a r exchange, b a n k e r s ' or t r a d e a c c e p t a n c e s were purchased by t h e Minneapolis F e d e r a l Reserve Bank, b u t t h e r e were p u r c h a s e s of w a r r a n t s t o the amount of $ 9 , 6 0 8 . 5 0 . During t h e month of September no p a p e r was p u r c h a s e d , b u t i n October a y e a r ago, $483,000 w o r t h of b a n k e r s ' acceptances were purchased by t h i s b a n k . October t h e r e were d i s c o u n t s of $75,000 i n bankers 1 During a c c e p t a n c e s as compared w i t h $10,724 i n September and none i n October a y e a r ago. Trade acceptances t o t h e amount of $259,$48 were d i s c o u n t e d i n October as compared w i t h $187,763 in September and $222,000 i n October l a s t y e a r . The r a t e s on a l l c l a s s e s of p a p e r were lowered t o 5 - 1 / 2 p e r c e n t on November 5 t h . - g- x-3257 1293 DISTRICT NO, 11 (DALIES) October r e p o r t s i n d i c a t e t h a t t h e a c c e p t i n g banks of t h i s D i s t r i c t c r e a t e d a c c e p t a n c e s amounting t o $3,691,580*74, ing on September 3 0 t h was $ 2 , 4 8 6 , 0 0 0 . The t o t a l amount o u t s t a n d - Of t h e amount c r e a t e d $2,325>659* 12 r e p r e s e n t e d domestic shipments and s t o r a g e of goods, w h i l e $1,365,921.62 was b a s e d on import and e x p o r t t r a n s a c t i o n s . The t o t a l amount of b a n k e r s ' a c c e p t - ances held b y t h i s Bank a& October 3 1 s t was $205,000, an i n c r e a s e d u r i n g the month, as $70,000 was the amount h e l d cm September 3 0 t h , All acceptances h e l d were executed b u t n o t endorsed b y banks of t h i s D i s t r i c t . DISTRICT NO. 12 (SAN fRMCISCO) The r a t e on prime b i l l s i n t h e acceptance market i s now 4 - 3 / 8 p e r c e n t a s compared w i t h 4 - 1 / 2 p e r c e n t a month ago. The o f f e r i n g of United S t a t e s T r e a s u r y c e r t i f i c a t e s of s i x months 1 m a t u r i t y a t 4 - l / 4 p e r c e n t on November 1, and t h e lowering b y l / 2 p e r c e n t of r e d i s c o u n t r a t e s a t t e n of the F e d e r a l Reserve Banks and of 1 p e r c e n t a t t h e o t h e r two Banks on November 3 , were a l l e x p r e s s i o n s of a tendency toward e a s i e r money r a t e s . This tendency was r e f l e c t e d i n t h e a c c e p t a n c e market by a r e d u c t i o n of the s e l l i n g p r i c e of prime b i l l s t o a 4—3/S b a s i s , the r u l i n g r a t e t o d a y , November 17th, as compared w i t h 4 - 1 / 2 p e r c e n t on October 15th, Up t o t h e time of change i n r a t e s , t h e b i l l market showed u n u s u a l a c t i v i t y b o t h i n s t r e n g t h and b r e a d t h of the demand. T h i s a c t i v i t y was h a l t e d a b r u p t l y b y t h e d e c r e a s e i n the y i e l d of a c c e p t a n c e s and has n o t resumed i t s f o r m e r p r o p o r t i o n s , a l t h o u g h the i n c r e a s i n g amount of i d l e f u n d s has caused a f i r m e r f e e l i n g and i n c r e a s i n g sales. The l a r g e s t d e a l e r on the Coast r e p o r t s t h a t a rough c l a s s i f i c a t i o n of b i l l s marketed d u r i n g the p a s t month would show a d i s t i n c t p r e f e r e n c e f o r 90 day a c c e p t a n c e s . His f i g u r e s a r e a s f o l l o w s : rf CD 02 - 9 - r i Maturity " " " * x-3257 of 30 days " 60 dayy " 9C days " 120 days " 150 days 9*0# 10.5^ 7-4.5$ 5-0# i.c# As was t h e c a s e l a s t month the b i l l s drawn i n t h i s D i s t r i c t were based p r i m a r i l y upon wheat, canned f r u i t s , sugar and c - f f e e , w i t h an appearance d u r i n g October of some c o t t o n b i l l s * D e t a i l s of purchases and h o l d i n g s of acceptances b y the 36 p r i n c i p a l a c c e p t i n g banks i n the D i s t r i c t appear i n the f o l l o w i n g tab lei Acceptances of 36 Reporting Banks. Amount Bought Amount held : Creates, in All o t h e r At Close of Month Total , Amount Accepted :12th i'ed.Res - B i s t . September Oct ob e r Sep tetnbe r October September October Sovtc^ber: Cstdbor September Oct ob e 0 2 5 ^ 7 0 IT77527224T6,52^,351 ?ac Northwest <J i 7 i I i b ; i 9 9 l ! i , 1 i n / & 9 : $ ~ 2 7 c 7 o 3 l T & 5 , S S f $276oiT^OI ,329,503 Northern Gal.. . ""Southern Cal. • 3^80,105 539,005 2,555.132:'2,072,211 160,000: 172,041 254,000 937.6f4 1,336,304 3,015,275 2,190,304 3,109,149 3,595,333 627,922 1,332,532 150,412 1,504,573 772,346 2,057,149 1,300,379 OtLsr D i s t r i c t s Total $5,259,309 $4,026;311:$2,520,333$2117,395:$4,27&,022 $2,27 6,225 :$7,392,415 $4,994,120:12,919,122 11,420,070 * One bank i n Lcs Angeles, r e p o r t i n g $336,505 as amount accepted i n October, d i d a c t r e p o r t i n September.
@FedFRASER