Full text of H.16 Capital Market Developments : June 15, 1956

The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.

Not for Publication DECONTROLLED AFTER SIX MONTHS
H.ll*

June 15, 1956
CAPITAL MARKET DEVELOPMENTS

The volume of publicly offered securities was substantial
during the week ending June 8. Corporations sold large issues totaling $105 million and State and local government offerings amount3d
to $77 million. Thisveek, ending May 15, an $18 million preferred
stock issue and $91 million of State and local issues are scheduled
for sale.
Bond yields - Changes in yields on outstanding bonds were
mixed last week. Yields on U, S. Government (new series) and State
and local government bonds declined, while yields on Aaa-rated corporate and U. S. Government (old series) bonds were stable and Baa
corporate yields increased slightly.
Stock market credit -Customer credit in the stock market,
excluding U. S. Government securities, increased slightly during Hay,
rising $U million to total $l*,0i*7 million at the end of the month.
An $18 million decline in bank loans to "others" largely offset a
$22 million increase in customers' net debit balances. The decline
in bank loans to "others" was the first decline of any size since
August 1955- Borrowing by member .firms of the NYSE maintaining
margin accounts, except on U. S.. Government securities, increased
$1*1 million while customers' net free credit balances declined $26
million. These and other data on stock market credit.are shown in
the table below.
End of month
May
April

Change

(Millions of dollars)
Customer credit
•Excluding U. S. Govt, securities - Total
l*,0l*3
„ Net debit balances
2,788
Bank loans to "others"
1,255
Net debit balances secured by U.S. Govt, securities
33
Bank loans to others for purchasing or carrying
U. S. Govt, securities
l*o
Broker and dealer credit
Money borrowed except on U. S. Govt, securities
On customer collateral
Money borrowed on U. S. Govt, securities
Customers1 net free credit balances




2,145
1,79k
1*1*
896

U,0l*7
2,810
1,237
38

+a
+22
-18
+5

1*0

0

2,186
1,81*0
. b2
870

+1*1
+1*6
-2
-26

H.Ik

- 2 -

Stock prices - Common stock prices, as measured by the
SEC index of 265 common stocks, declined 3.1 points during the week
ending June 8, closing at 269.8. Daily indexes(indicate a substantial recovery in stock prices through Thursday of this week, although
they are still well below the early May highs.
State and Local Government Security
Offerings in the First Quarter 1956
Purpose of issue
State and'local governments sold $1.5 billion of bonds during the first three months of 1956, as shown in the table on the following page, a record first quarter volume and 8 per cent greater
than last year. Nearly all issues sold were for the purpose of
raising new capital. As in most other recent years, the volume of
refunding issues was small.
School construction was the most important purpose of
financing during the first quarter this year, amounting to $i;01
million. School financing was about one-tenth smaller than in the
first three months of 1955> however. Issues to obtain funds for
highway, bridge and tunnel construction were the second largest in
volume, totaling $280 million, nearly 60 per cent more than last
year. This unusually large volume of highway financing in the first
quarter is largely attributable to the sale of a $100 million
Connecticut Expressway issue in February which had originally been
scheduled for offering in late 1955f but had been postponed because
of the market conditions prevailing in December of last year. The
third most important purpose of financing was sewer and water which r
totaled $26U million, two-thirds greater than in 1955. The volume 1
of bonds sold to provide for residential building by local governments was $111 million, about one-third smaller than a year earlier.
Type of issuer

-r

Municipalities were the most important type of issuer during the first three months of 1956, selling bonds totaling %hkh million. This volume.was one-third greater than in 1955. Issues of
State governments totaled $270 million, one-fourth smaller than last
year. Offerings of special authorities were $253 million, one-half
larger than last year, while county and township and school district
issues were in about the same volume as in 1955.
Type of issue
General obligations were the most important type of issue
during the first quarter of 1956. The volume amounted to $1,067
million, slightly less than in the corresponding period last year.
The volume of revenue bond financing was unusually large for a first
quarter, over one-half more than last year. Revenue bonds accounted
for 30 per cent of total volume, a larger proportion than in any
first quarter since 1952.




- 3 -

Hill*

Long-Term Security Issues of State and Local Governments
First Quarter
(In millions of dollars)
1956
Issuing authority:
State
County and township
Municipality
School district
Special authority
Unidentified 1/
Total
Purpose of issue:
New capital total
Schools
Highways, bridges, tunnels
Residential buildings
Hospitals and institutions
Sewer and water
Misc. public service enterprises
Recreation
Port and. airport
Veterans aid
Industrial buildings
Other .
Unidentified 1/
Refunding
Total
Type of issue:
General obligation
Revenue
General revenue 2/
Total

1955

195k

270
3hh
9U . 109
1*1*1*
333
270
29k
253
167
186
162

1952

217
126
1*12
232
258
139

253
65
315
225
23?
97

101*
57
213
111*
368
182
1,038

1,517

1,1*09

1,381*

1,188

3-A9Q

1,385

1,372

MIA

1*01
280
111
22
261*
80
10
17
-0
1
119
186

kh9
176
175
30
159
77
13
1
82
0
65
159

1*05
11*5
182
15
186
70
9
25
67
0
133
137

319
11*1*
137
25
190
75
11*
.1
111
1
61
97

216
76
11*7
13
90
52
3/
5
0
2
32
182

27-

21*

11

12

223

1,517

1,1*09

1,381*

1,188

1,038

1,067
1*50
0

1,122 1,028
287 . 356
0
0

991
197
0

726
312
0

1,517

1,1*09

1,188

1,038

1,381*

1/ Issues of less than $500,000 not further classified.
2/ Total of issues with proceeds of $5 million or over.
3/ Under $500,000.
Note.—Details may not add to totals because of rounding.
Source.—Bond Buyer and Federal Reserve.




1953

815

- It-

II. lit

Corporate Security Offerings
in the First Quarter 1956
Met proceeds for new capital
Corporations sold $2.2 billion of security issues to obtain
new capital during the first quarter of 1956, a volume slightly smaller
than in the corresponding period last year but larger than in other
recent years.
. Manufacturing companies were; the most important group of
issuers, offering securities with proceeds of $626 million. This
volume was one-sixth smaller than that of the first quarter of 1955.
Sharpest decline was in offerings by the motor vehicles and equipment industry.. It should be noted that the volume in the first quarter of last year included the General Motors common stock issue of
$329 million; there was ho single issue of this magnitude sold by
any manufacturing company this year. Paper, textile and apparel,
and primary nonferrous metal manufacturers sold a markedly greater
volume of securities during the first three months of this year than
in the corresponding period of 1955, but the volume for other industrial groups was about the same this year as last.
Financial and real estate companies offered the second
largest volume of securities in the first quarter, $589 million.
Consumer finance companies accounted for the bulk of the.total, as
last year, although common stock offerings of banks were sizable in
both periods.
Offerings of electric, gas and water utilities were
slightly smaller in volume this year than last, despite the increased spending for plant and equipment anticipated for 1956.
There were also moderate declines in the volume of offerings by
mining and commercial and other corporations. On the other hand,
offerings of communication companies totaled $1&2 million, nearly
three times last year's volume, as the result of three fairly large
issues by telephone companies.
Total gross proceeds
Gross proceeds from corporate offerings, which include
refunding and costs of flotation, were $2.2 billion, during the
first three months of 1956, one-eighth smaller than last year, as
shown in Table 2. The greater part of the decline was in refunding issues, which were only about $100 million this year as compared to over $300 million in 1955.




: 5 -

H.lU

Table 1
Corporate Security Offerings for New Capital
by Type of Business of Issuer
First Quarter
(Net proceeds in millions of dollars)
1956

1955

1954

1953 .

1952

2,073

2,165

1,608

1,912

1,979

626
73
68
67
66
61
50
48
iiO
24
15
Ilk

752
22
. 1
65
66
9
325
47
10
36
36
.133

Electric, gas and water utilities

446

Communication

142

Railroad

85

53

85

89

Other transportation

51

39

59

68

Commercial and other

81

123

Mining

' 52

78

83

96 )
)
29 )

Financial and real estate
Consumer finance companies
Banks
Other

589
456
94
39

580
. m
80
62

All corporate offerings
Manufacturing
. Paper
Textiles and apparel
Petroleum
Machinery
Primary nonferrous metals
Motor vehicles and equipment
Chemicals
Rubber
Foods
Primary iron and steel
Other 1/

%

6l|

9
96
33
20
5
14
14
15
15
27

12
101
158
15
0
176
30
24
25
62

32
49
168
166
8
196
28
57
86
188

487

857

66.9

670

52

61

51

10

'

148
~BT.
14
53

299
2E.
30
25

.

58
110
80
47
Iff
9
20

1/ Includes small volume of foreign issues not further classified in the
manufacturing group. In 1952, it also includes a #103 million issue by a tobacco
company.
Note.—Details may not add to totals due to rounding.
Source.—Securities and Exchange Commission and Federal Reserve.




H.Ik

- 6 Table 2
Total Corporate Security Offerings by Type of Issue
First Quarter
(Gross proceeds in"millions of dollars)

Type of issue

.1956

1955

1954

19531

1952

2*226

.2,530

1,730

2,039

2,066

1,204
, 1,022

1,739
791

1,073
656

1,139
899

1,268
798

1,682
683
1,000

1,662
894
768

1,318
689
629

1,524
649
875

1,551
756
795

Preferred stock

189

111

115

159

152

Common stock

355

758

296

356

363

Total corporate offerings
Type c-f offering
Public
Private
Type of security
Bonds and notes
Public
Private

.

Source. —Securities and Exchange Commission.

Nearly one-half of corporate offerings were private placements , a considerably higher percentage than in most recent first
quarters. The volume of private placements was larger than in any
other first quarter.
Debt financing was slightly larger in volume this year
than last, and preferred stock financing also increased. Despite
the higher level of stock prices, offerings of common stocks were
less than one-half of last year's volume; equity financing accounted
for only one-fourth of total security issues this year as compared
to one-third in 1955. The 1955 volume includes the large General
Motors stock issue noted above, however, which resulted in a considerably higher ratio of equity to debt flotations than in other
recent first quarters, when the ratio was about the...same as this
year. The volume of financing through convertible bonds and convertible preferred stock increased, amounting to about &150 million during the first three months of 1956. This was one-half
greater than in the corresponding period of 1955.
More detailed information concerning recent market developments is presented in the attached exhibits.

Business Finance and Capital Markets Section,

Division of Research and Statistics.



H I G H - G R A D E BOND YIELDS

CORPORATE

\
\

U. S. GOVERNMENT
| long-term

STATE AND LOCAL
GOVERNMENT A o o

1953

u. s. Govt., long-term 2/
Corporate
Aaa 1/

Old series

New series

Spread between
State and
U. S. Govt,
local govt. (old series) and
Aaa J /
Corporate1State and
Aaa
1local Aaa

(Per cent)
1953 - High
Low
195k - High
Low
1955 - High
Low
1956 - High
Low

3.12
2.99
3.09
2.85
3.17
2.91
3-30
3.07

May 11
May 18
May 25

3.27
3.27
3.27
3.27
3.27

June 8

(6/19)
(1/9)
(1/8)
(V23)
(12/23)
(1/7)
(5A)
(3/2)

3.15 (6/6)
2.78 (12/26)
2.7k (1/9)
2.hh (8/7)

n.a.

2.9k (8/5) 3.03 (8/5)
2.62 (1/7) 2.89 (6/10)
3.08 (li/20) 3.13 (U/20)
2.80 (2/17) 2.92 (2/3)
2.98

2.9h
2.8 9
2.87
2.87

3.05
3.03
3.00
2.99
2.98

2.73
1.98
,2.21
1.90
2.3U
2.05
2.51
2.17
2.I18
2.B
2 .hh
2.U2
2.38

(6/25)
(1/8)
(6/10)
(9/2)

(9/8)

(5/26)
(5/3)
(2/23)

.38
.19
.L3
.32
.31
.13
• liO
.13
.29
.33
.38

.h0
.ho

,8h
.30
.61
.29
.70
•5U

.68
.U5
.50
.50

.hS
.15
• U9

2/ Weekly averages of daily figures. The old series includes fully taxable,
marketable 2 1/2 per cent bonds due or first callable after 12 years through
September 1955> and those due or callable in 10-12 years thereafter; the average
term to first call of the bonds included declined from Hi years in early 1953 to
11 1/2 years in early 1956. The new series is comprised of the 3 per cent bond
of 1995 and the 3 l / h per cent bond of 1978-83.
3/ Thursday figures. Only general obligation bonds are included; average
term Ts 20 years.
Note.—Highs and lows are for individual series and may be on different dates
for different series.
.




EXHIBIT B

LOWER - GRADE

BOND

YIELDS

Weekly

Per cent per annum

STATE AND LOCAL GOVT. Boa
I /V
! Moody1. i
-I / V

i

^

r

STATE AND LOCAL GOVT. REVENUE

u_LkjJ.

KM~

Corporate
Baa 1/

Date

<

1953 - High
Low
1951* - High
Low
1955 - High
Low
1956 - High
Low

3.89
3.50
3.74
3.1*
3.63
3.45
3.75
3.58

May 11
May lb
May 25
June 1
June 8

3.72
3.73
3.73
3.74
3.75

(9/18)
(1/2)
(1/8)
(12/31)
(12/30)
(1/14)
(6/8)
(3/9)

State and
local govt.
Baa y

State and
local govt,
rev. y

(Per cent)
3.79
2.96
3.32
2.93
3.26
3.02
3.44
3.20
3.U0
3.37
3.33
3.31
3.28

(6/25)
(1/8)
(1/7)
(8/5)
(12/2?)
(1/6)
(5/3)
.
(3/8)

3.27
2.71
3.00
2.72
2.99
2.76
3.12
2.89

(6/26)
(1/2)
(1/1)
(8/13)
(12/30)
(1/7)
(4/27)
(2/24)

3.06
3.04
3.04
3.03
3.02

age of daily figures. Average term of bona?
—
included is 25-26 years.
2/ Thursday figures. Only general obligation bonds are
included; average term is 20 years.
J/ Friday figures. Average rating of bonds included is
between Baa and A; average term is 20 years.
Note.—Highs and lows are for individual series and may
be on different dates for different series.




STOCK MARKET

Date

Stock price
index 1/

Common 1 Stock market customer credit
Trading
Customers1
stock
volume 2/
(millions yields % / I Total debit bal- loans to
ances 4/ "others" 5/
of shares) (per cent)1
(Millions of dollars)

1953 - High
Low
1954 - High
1955 - High
Low
1956 - High
Low
April
May
May 25

167.1
144.0
221.4
156.5
270.7
217.4
290.8
257.4

(1/2)
(9/18)
(12/31)
(1/6)
(12/30)
(1/14)
(4/6)
(1/20)

286.8
280.1
268.0
272.9
269.8

2.5
0.9
3.7
1.4
4.6
1.5
3.1
2.0

5.75
5.15
5.33
4.20
4.22
3.78
4.08
3.68

2,445
' 2,055
3,436
2,405
4,030
3,537
4,043
3,991

1,665
1,314
2,388
1,653
2,805
2,517
2,788
2,740

780
664
1,048
746
1,241
1,018
1,267
1,237

2.6
2.4
2.3
2.2
2.0

3.69
3.97
n.a.
n.a.
n.a.

4,043
n.a.
n.a.
n.a.
n.a.

2,788

1,255
1,237
1,240
1,237
n.a.

n.a.~Not available.
1/ SEC index of 265 common stocks, weekly closing prices, 1939-100; converted
to 19u7-49-100 by Federal Reserve. The conversion factor is 123.91.
2/ Averages of daily trading volume on the New York Stock Exchange.
3/ Moody's 200 common stocks; end of month figures.
%/ End of month figures for member firms of the New York Stock Exchange which
carry margin accounts; excludes balances secured by U. S. Government obligations.
3J 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 b&nks account for about 72 per cent of loans to others.
Note.—Highs and lows are for individual series and may be on different dates
for different series.




Exhibit D
Corporate and State and Local Government
Security Offerings and Placements
(In millions of dollars)
New capital

1956

Corporate
I .' 1955 | 1954

1956

State and local
1
1955
1 1954
396

579
70U
790

235
U07
1,223

547
426
635

404
696
2/ 375

535
312
5#

e/890
e/lflC0
e/875

478
886
687

497
656
842

e/350
a/500
e/700

427 350 .
641

748
853

July
August
September

597
644
670

909
335
747 .

470
249
406

279
261
649

October
November
December

1,162 ^
632
900

1,003
290
60i|

919
658
408 :

594
423
877

2,165
2,052
1,911
2,695
8,821

l,608
1,995
1,991
1,896
7,490

January
February
March
April
May
June

1st quarter
" 9 nd quarter
4prd quarter
4th quarter
Year

2,073
e/2,865

1

1st quarter
2nd quarter
3rd quarter
Uth quarter
Year

:

1,385
1,418
1,124
1,984
5,911

1,372
2,334
1,188
1,894
6,789

Excluding finance companies 2/

1,617
e/2,6'6'5

1,727
1,870
1,43k
2,554
7,569

1,527
1,927
1,911
1,792
7,158

e/ Estimated.
'
1/ Includes $637.2 million AT&T convertible debenture issue.
2j Total new capital issues excluding offerings of sales and personal finance
companies.
Note.—Details may not add to totals due to rounding.




H.ll*

Exhibit E
Large Public Security Issues for New Capital
(Other than U. S. Treasury) 1/
Proceeds of Large Issues Offered
(Millions of dollars)
Corporate

Month

State and
local government

Other

152
1*03
278
65
23k
7161*01
227
192
W*
163
157
233

25
50

U83
175
101
1*05 328
805
221
263
95
212
278
395
623

1955 - May
June
July
August
September
October
November
December
1956 - January
February
March
April
. May

—
—

50
"

Large Individual Issues Offered June 1 through 8

Issuer

Type 3/

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

CORPORATE
Commonwealth Edison
U. S. Plywood
Household Finance

1st mtg. bds. 1*0.0
Deb.
15.0
Deb.
50.0

1986
1981
1978

3 1/2
1* 1/1*
1*

3.50
L25
1*.00

Aaa
Baa

STATE & LOCAL GOVERNMENT
6.0 1956-96
Rev,
Wash. Toll Bridge Auth.
G.O.
Cincinnati, Ohio
8.5 1957-96
New York, N. Y.
G.O.
30.0 1957-71
G.O.
Denver, Colorado
5.3 1967-95
22.0 1958-75
Chicago, Illinois
G.O.
l*.o 1959-78
Elec. rev.
Tallahassee, Florida
Util. tax rev. 1.5 . 1958-82
Tallahassee, Florida
OTHER
None




n.a.
2.35
2.80
2.50
2.61
3.13
3.07

y
1.70-2.50
2.00-2.80
2.10-2.55
2.10-2.65
2.60-3.15
2.25-3.10

Aaa
A
Aa
A
Baa
A

H.lU

E-2

1/ Includes corporate and other security offerings of &1J> million and overj State and local government security offerings of $>5
million and over.
2/ Includes foreign government arid International Bank for
Reconstruction and Development issues.
3/ In the case of State and local government securities, G.O.
denotes general obligation; Rev., revenue bonds; G.R., general
obligations additionally secured by facilities revenues; L.L.,
limited liability obligations secured by pledge of designated revenues.
h/ No reoffering.




H.Ik

Exhibit F

Forthcoming Large Public Security Offerings, for New Capital
(Other than U. S. Treasury) 1/
Expected Proceeds from Forthcoming Large Issues
Subsequent to
During month following
date shown
date shown
State
and
Other 2/ Corporate State and Other 2j
Corporate
local govt.
local govt.

Date of
computation

160
6?
b07
222
805
202
215
70
175
123
380
568
198

1955 - May 31
June 30
• July 29
Aug. 31
Sept. 30
Oct. 31
Nov. 30
Dec. 30
1956 - Jan. 31
Feb. 29
• Mar. 30
Apr. 30.
May 31

339
3bh
100
18U '
81*3
330
205
121
327
220
132
173 .
332

__
——
— *•

50

850
830
•1,135
920
909
112
230
85
376
233
1,013
818
168

1,861
1,8)45
2,018
.1,971 ^
2,205
1,650 .
756
618
917
785
811
832
9hl

—
—
—

50

Forthcoming Large Offerings, as of June i
Type

Issuer

. Amount Approximate date
(millions
of offering
of dollars)

CORPORATE
Conv. sub. deb.
Common stk.
Common stk.

Combustion Engineering
/'Halliburton Oil Well Cementing Co.
National Gypsum
Boston Edison
^Pacific Gas and Electric
American Telephone and Telegraph
err Financial
Pacific Finance

15.0
25.9
19.6

Pfd. stk.
Common stk.

18.0
36.6

Deb.
Deb,
Deb.

250.0
75.0.
25.0

June 19
June 20
June 25
(rights expire)
June
July 2
(rights expire)
July 10
1956
1956

• STATE AND LOCAL GOVERNMENT
Pennsylvania General State Auth.
Georgia Rural Roads Authority
State of California
Hudson County, New Jersey
^-Alexandria, Louisiana
Washington. Suburban Sanitary
District, Maryland




j

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

20.0
15.5
50.0
5.1
8.3

G.O.

8.5

June
June
June
June
June

12
12
13
llj.
19

June 21

H.lU

F-2
Forthcoming Large Offerings,, as of June 8 (Cont'd)

w

Issuer

Type

Amount
Approximate date
(millions
of offering
of dollars)

STATE AND LOCAL GOVERNMENT (Cont'd)
•M-Power Authority of the State
of New York
Long Beach, California
Public Housing Authorities
Grant County Public Utility
District, Washington
Florida State Turnpike Authority
Oklahoma Turnpike Authority
Pennsylvania Turnpike Commission
Washington State Toll Bridge Auth.
Inter-American Center Auth., Fla.

Rev.
G.O.
Rev.
Rev.
Rev.
• Rev.
Rev.
Rev.

7.3
5.9
93.3

June 21
June 21
June 27

163.0
165.0
65.0
62.0
227.0
70.0

June
Summer
1956
1956
1956
1956

20.0

June 27

OTHER
* British Columbia Power Commission

SF deb. '

*—Included in table for first time.
n.a.—Not available.
1/ Includes corporate and other issues of $15 million and over; State and
^local"government issues of $5 million and over.
2/ Includes foreign government and International Bank for Reconstruction
and Development issues.