Full text of H.16 Capital Market Developments : September 2, 1958
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Not for Publication DECONTROLLED AFTER SIX MONTHS H.lii September 2, 1958 CAPITAL MARKET DEVELOPMENTS (Including Quarterly Review of Corporate Security Financing) The volume of new public security financing was moderate last week and is expected to be only slightly larger this week. During the week ending August 29, one large corporate issue for $50 million and two large State and local government issues with aggregate proceeds of $5U million were offered. The calendar for this holiday-shortened week includes a $150 million debenture issue of Standard Oil Company of California (which had been originally scheduled for sale in late June) and a $17 million State government issue. Bond yields - Yields continued to increase last week for all types of outstanding bonds. The increase was particularly sharp for yields on State and local government bonds. Bond yields increased sharply throughout August, with those on State and local government bonds increasing about 1*0 basis points, while corporate bond yields increased about 20 points. Yields on outstanding U. S. Government obligations increased nearly 30 points during the month. ' At current levels, yields on-U. S. Government bonds are less than 10 basis points below their 1957 high, while yields on corporate and State and local government bonds are 20-30 basis points below their highs. The sale by New York City of an A-rated, $32 million bond issue last week presents an opportunity to trace relative changes during the past year in new issue yields on bonds of varying maturity. < New York City sold similar issues in August last year and in May this year, when yields were near their highs and lows, respectively. In the downturn last year, yields on the shorter-tera maturities declined more rapidly than those on the longer maturities, but in the upturn in recent months have increased more rapidly. Yields on bonds with maturity in one year declined 190 basis points in the August-May period while those on bonds maturing in 15 years declined only 90 basis points. Yields for the shortest maturities have increased 75 basis points since May, while those for the longer-term maturities have increased 39 points. The spread between the offering yields on one-year and 15-year maturities for the latest issue is therefore much narrower than it was in May, although not as narrow as in August last year. H.lli — 2 — New York City Bond Issues Yields by maturities (per cent) Amount (millions of dollars) 1 year 1*0.0 U7.3 32.1* 2.75 .85 1.60 August 15, 1957 May 15, 1958 August 26, 1958 5 years 10 years 15 years 3.1*0. 2.00 2.70 3.70 2.60 3.25 . 3.80 2.90 3.29 September security volume - The volume of new financing is expected to be large this month, both for corporations and State and local governments. The September volume of corporate issues for new capital is expected to total $1.2 billion, nearly two and a half times as great as the estimated volume in August, and about one-fourth larger than offerings in September of last year. The calendar for this month includes three very large public issues—those of Standard Oil Company of California, Sears Roebuck and Company and Standard Oil Company of Indiana—with total proceeds of $700 million» A volume of $2.9 billion in the third quarter (only slightly below sales a year earlier) would bring the first nine months total to $8.6 billion, about 9 per cent below the record volume in the corresponding period of 1957. State and local government security issues for September are currently estimated at $600 million. This volume would be one-half larger than in August and two-fifths greater than in September 1957. Including the estimated volume for this month, State and local government security financing in the first three quarters of the year would total a record $6.1 billion, one-fifth greater than the volume a year earlier. Stock prices - Stock prices showed little net change last week. Standard and Poor's index of $00 common stocks closed at h7»7S on August 29. Trading activity picked up somewhat, averaging 2.7 million shares a day. ' Corporate Security Offerings in the First Half 1958 Net proceeds for new capital - Corporations sold $5.8 billion of security issues to obtain new capital in the first six months of 1958, as shown in Table 1. (The totals shown in Table 1 exclude refunding issues and costs of flotation.) This volume was one-eighth below the record volume in corresponding period of last year, but was substantially above that of any other first half. The volume of new issues in the second quarter was 17 per cent smaller than that of the corresponding period last year, while first quarter volume was only 9 per cent smaller than a year earlier. p.U* - 3 Table 1 Corporate Security Offerings for New Capital by Type of Business of Issuer First Six Months' 19514-1958 (Net proceeds in millions of dollars) All corporate offerings Manufacturing Primary nonferrous metals Petroleum and refining Paper Electrical machinery Fabricated metal products Chemicals Other transportation equipment Foods Nonelectrical machinery Primary iron and steel Stone, clay and glass Beverages Printing Other 1/ Electric, gas and water utilities. 1958 1957 1956 5,756 6,593 U,907 225 122 115 9k 92 89 85 69 55 1*2 . ho 22 226 2,082 . H B 1*1*1 78 58 69 86 38 39 1*00 183 90 3 20 1*85 2,116 206 171 338 29 76 52 69 10k 35 121 10 18 321 1,30k 1955 1951* • it, 216 3,603 L381 32 87 ko 50 33 57 78 59 83 21*3 1*3 16 7 552 1,156 808 W 106 58 1*2 20 81* 63 125 30 62 3 8 65 1,797 Communication 930 696 21*8 121 136 Railroad 127 210 168 88 112 Other transportation 282 195 160 132 150 Commercial and other 110 150 150 200 113 Mining 106 122 11*5 196 217 Financial and real estate 556 732 280 276 1*68 26U Sales and consumer finance cos. Other h m 719 1400 9kh 269 620 321* 11*8 121 1/ Includes small volume of foreign issues not further classified in the manufacturing group. Note.—Details may not add to totals due to rounding. Source.—Securities and Exchange Commission and Federal Reserve. H.Ik - k - Electric, gas and water utilities were the most important group of issuers during the first half, offering securities with proceeds of $2.1' billion, only two per cent smaller than last year. A greater proportion of this volume was sold in the first quarter this year than last3 utility finane ing during the first quarter was one-eighth larger than a year earlier, but volume-in the second quarter of 1958 was one-eighth smaller than during the corresponding period of 1957. New capital offerings by manufacturing companies totaled $1.6 billion during these six months, one-third less than the record -volume a year earlier. The smaller volume this year resulted almost entirely from the low level of financing by manufacturers during the first quarter, as sales during the second quarter were only slightly below the volume a year earlier. Financing by primary iron and steel, nonelectrical machinery and petroleum concerns was much smaller this year than last. New financing by the latter two industries had been particularly heavy last year, reflecting the sale of a number of very large public issues, some of which were common stock offerings. , New issue volume by communication conpanies was the third most important category during the first half of the year, with proceeds of $930 million, $23k million more than in the first half 1957. Much of the total this year is accounted for by the §718 million AT&T convertible debenture issue sold in March. (Last March, AT&T sold a $250 million debenture issue.) Financial and real estate company issues, with total proceeds of $556 million, were nearly one-fourth smaller than in the corresponding half of 1957. The volume of new capital issues by sales and consumer finance "companies was two-fifths less this year, with the second quarter volume being very small, only $39 million. In the first quarter issues by these finance companies had been in larger volume than a year earlier. Offerings by transportation (other than railroad) corporations were in larger volume this year than last; offerings by railroads, mining and commercial and other companies, however, were smaller. Total gross proceeds - Gross proceeds from corporate offerings, which includes refunding issues and costs of flotation, were $6.2 billion during the first half of 1958, $600 million less than a year earlier. The volume of financing for refunding of outstanding securities was four times = larger this year than last, but still totaled less than $U00 million, substantially below the volume of the corresponding period of 195k and 1955• Publicly-offered issues totaled $U.5 billion in the first six months this year. While this volume was nearly one-tenth less than last year, this type of offering accounted for about the same proportion (73 per cent) of total security offerings as a year earlier, for the volume of privately-placed securities was also one-tenth smaller than in 1957. H.lU - 5 Table 2 Total Corporate Security Offerings by Type of Issue First Six Months 1954-1958 (Gross proceeds in millions of dollars) Type of issue 1958 1957 1956 1955 1954 Total corporate offerings 6,222 6,815 5,239 4,943 4,261 Type of offering Public Private 1,515 1,707 4,949 . 3,139 1,866. . 2,100 3,406 1,537 2,677 1,584 Type of security Bonds and notes Public Private 5,406 3,749 1,658 5,060 3,251* 1,805 4,017 1,978 2,039 3,304 1,841 3,304 3,177 1,669 1,508 Preferred stock 318 237 337 319 485 1,519 884 1,320 599 Common stock 198 Note—Details may not add to totals due to rounding. Source—Securities and Exchange Commission. Offerings of bonds and notes were in record volume during the first half of the year, totaling $5.4 billion, 7 per cent more than a year earlier. While privately-placed debt issues were in smaller volume this year than in the first half of 1957, public offerings were 15 per cent larger. The latter accounted for the largest proportion of debt issues (69 per cent) in any six months period in the post-war period. In part this reflected the importance of publicly-offered convertible bond issues (including, of course, the very large AT&T issue) which accounted for nearly one-sixth of all debt offerings. Nonconvertible fixed-income security sales were in about the same volume during the first half of this year as in 1957. The volume of preferred stock issues, while still relatively small, was one-third larger than last year. On the other hand, common stock offerings totaled only one-third the volume sold during the first six months of last year. This was the smallest volume for any half-year period since 1950. More detailed information concerning recent capital market developments is presented in the attached exhibits. Capital Markets Section, Division of Research and Statistics, Board of Governors of the Federal Reserve System. HIGH-GRADE B O N D YIELDS Per LOWER - GRADE B O N D YIELDS cent per < 1 H.lli Exhibit B Tables for Exhibit A High-gi-ade Bond Yields Date State and local govt. Aaa y Spread between U. S. Govt, and Corporate State and local Aaa Aaa Corporate Aaa 1/ U. S. Govt, long-term 2/ 3Jl2 (6/19) 2.85 a/23) li.llt (9/27) 3.9k (8/29) 3.55 (5/2) . 3.19 (6/5) 2.15 (8/6) 3.76 (10/18) 3.67 (8/29) 3.07 (U/25) 2.73 (6/25) 1.90 (9/2) 3.1*5 (8/29) 3.22 (8/28) 2.6U (5A) .38 .30 .60 .51 .22 .83 .30 • kl .62 .3U 3.71 3.77 3.83 3.89 3.9k 3.kk 3.53 3.61 3.62 3.67 2.82* 2.91 3.0U 3.12 3.22 .27 ,2k .22 .27 .27 .60 .62 .57 .50 .15 (Per cent) 1953 195k 1957 1958 - High Low high High Low Aug. Aug. Aug. Aug. Aug. 1 8 15 22 29 2/ Lower-grade Bond Yields Date Corporate Baa 1/ State and local govt. Baa 1/ Spread between Aaa and Baa State and Corporate local govt. (Per cent) 1953 1S5U 1957 1958 - High Low High High Low Aug. Aug. Aug. Aug. Aug. 1 8 15 22 29 g/ 3.89 (9/18) 3J1U (12/31) 5-10 (11/29) It. 96 (1/3) k.Sl (7/11) 3.79 2.93 14.51 1.21 3.6k L56 li.60 h.66 ii.71 It. 7k 3.83 3.92 ii.03 it.io 1.21 (6/25) (8/5) (8/29) (8/28) (5/1) .69 .52 1.27 1.28 .80 1.21 .96 1.21 1.11 .98 .85 .83 .83 .82 .80 .99 1.01 .99 .98 .99 2/ P r e l i m i n a r y . ~ " 1/ Weekly average of daily figures. Average term, of bonds included io 25-26 years. 2/ Weekly average of daily figures. The series includes bonds due or callable in 10 years or more. 2/ Thursday figures. Only general obligations bonds are included; aveiape term is 20 years. Note.—Highs and lows are for individual series and may be on different dates for different series. v ' STOCK MARKET EXHIBIT C Exhibit D Table for Exhibit C Stock Market Date Stock price index 1/ Trading Stock market customer credit Common stock Customers' Bank volume 2/ (millions yields V Total debit bal- loans to of shares) (per cent) ances 4/ "others" 5/ (Millions of dollars) 1953 - High Low 1954 High Low 1955 - High Low 1956 - High Low 1957 - High Low 1958 - High Low June July Aug. 15 Aug. 22 Aug. 29 2/ 26.54 (1/2) 22.95 (9/18) 35.98 (12/31) 24.93 (1/8) 15.89 (12/9) 35.28 (1/14) to.6k (8/3) 1*3.22 (1/20) 1*9.08 (7/12) 39.48 (12/20) 18.05 (8/8) 10.37 (lAO) 2.5 0.9 3.7 1.4 4.6 1.5 3.1 1.5 4.2 1.4 3.8 1.7 44.75 45.98 47.50 .. 47.73 47.75 2.7 3.2 2.9 2.5 2.7 5.38 6.25 4.32 5.82 4.08 4.41 3.82 4.34 ts 3.74 4.58 4.07 3.97 3.79 3.77 3.77 2,455 2,405 4,Q30 3,537 4,047 3,914 4,031 3,576 4,251 3,554 4,226 4,251 n.a. n.a. 1,665 1,314 2,388 1,653 2,805 2,517 2,823 2,740 2,887 2,482 3,020 2,487 2,929 3,020 n.a. n.a. n.a. 780 664 1,048 746 1,241 1,018 1,267 1,155 1,163 1,054 1,317 l,05l 1,297 1,231 1,189 1,184 n.a.—Not available. jo/ Preliminary. 1/ Standard and Poor's composite index of 500 common stocks, weekly closing prices, 1941-43=10. Monthly data are averages of daily figures rather than of Fridays' only. Highs and lows are for Friday's data only. 2/ Averages of daily trading volume on the New York Stock Exchange. 2/ Standard and Poor's composite stock yield based on Wednesday data con- verted to weekly closing prices by Federal Reserve. Yields shown are for dates on which price index reached its high or low. 4/ End of month figures for member firms of the New York Stock Exchange which cany margin accounts; excludes balances secured by U. S. Government obligations. 5/ 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 banks account for about 70 per cent of loans to others. For further detail see Bulletin. Note.—Highs and lows are for individual series and may be on different dates for different series. Exhibit E Long-term Corporate and State and Local Government Security Offerings and Placements (In millions of dollars) 1958 New capital Corporate 1/ State and local 2/ 1 1956 1957 1958 1 1957 1 1956 January February March 723 851,/ 1,561^/ April May i,iki 600 891 1,453 % 818 l,lk6 841 j e/1,150 e/500 e/1,200 1,003 92k 973 1,063 65k 838 1,090 789 1,076 1,089V 1,088 3,135 2,622 e/2,850 3,kk5 3,lk9 2,899 2,95k 2,102. 2,805 2,556 2,922 5,757 e/8,607 6,59k 9,k93 12,kk7 7,'to. 10.381 July August September October November December 1st 2nd 3rd kth quarter quarter quarter quarter 1st half Three quarters Year 1,060 1,065 . 1,320 573 712 817 812 7U2 572 506 kOk 696 390 798 765 5k6 393 378 k90 735 EZ627 e/kOO e/ 600 529. 581* 131 k08 206 357 698 633 6# 639 3k7 k09 2,276 2,213 e/1,627 1,820 1,70k 1 ,5kk 2,029 1,490 1,603 971 1,395 . U,U89 e/6,116 3,52k 5,069 7,099 3,093 k,06k 5,159 ' 511 %l Excluding finance companies 1st 2nd 3rd kth quarter quarter quarter quarter 2,89k 2,583 e/2,800 Year 3,237 2,889 2,582 2,810 11,518 l,6k7 • 2,5kl. 2,2k6 2,826 9,260 ]/ Securities and Exchange Commission estimates of net proceeds. 2/ Data through June 1956 are Bond Buyer data classified as new capital by Federal Reserve; later data are from the Investment Bankers Association of America and are somewhat more complete as to coverage than the earlier data, particularly for Federal Government loans. 3/ Includes $718.3 million AT&T convertible debenture issue. k/ Includes §571-5 million AT&T common stock issue. 1/ Total new capital issues excluding offerings of sales and consumer finance companies. H.lii Exhibit F Other Security Offerings 1/ (In millions of dollars) Foreign government 2/ Long-term January February March 196 53 8U 1*9 30 37 April May June 139 198 120 123 1*8 1*2 July August September 28 7 30 October November December 1* 60 1 Year 507 Federal agency 3/ 1956 1%T 1,163 251 72 50 523 125 95 — 8 — 2 39 April May June JulyAugust September 60 — 109 215 ' — 1*1* 5 21 — 100 300 169 572 Short-tern State and local government h/ January February March — 60 Federal agency 3/ 233 i|60 273 #6 1*55 11*7 196 357 2l*9 371 208 1UU 638 1*30 505 380 220 283 357 351* 261* 205 337 153 125 252 176 209 161 329 336 1*6° 501 #3 3lli 260 2/286 272 272 252 195 207 179 601 221* 370 512 222 125 273 303 9h 159 29I1 328 ll*8 1,238 255 116 1*07 222 128 3,27li 2,706 5,513 3,1*57 October November December Year e/ Estimated, w 1/ Data presented in this exhibit differ from those in Exhibit E in that refunding issues, as well as new capital issues, are included. Long-term securities are defined as those maturing in more than one year. 2/ Includes securities offered in the United States by foreign governments and their subdivisions and by international organizations. Source: Securities and Exchange Commission. Issues not guaranteed by the U. S. Government. Source: long-term, Securities and Exchange Commission; short-term, Federal Reserve. h/ Principally tax and bond anticipation notes, warrants or certificates and Public Housing Autho • *.y notes. In some instances PHA notes included may have a somewhat longer term t one year. Source: Bond Buyer. Exhibit G H.lli Large Long-teim Public Security Issues for New Capital (Other than.U. S. Treasury) 1/ Proceeds of Large. Issues Offered (Millions of dollars) Month 1957 - August September October November December 1958 - January February March April May , Corporate State and local government #6 537 57li h20 399 318 605 1,093 725 .#6 281 771 209 July 266 133 393 3kk koh lao 553 182 300 505 195 275 109 Other 2/ 2h$ iSh 1,357 266 653 16k 86 111 Large Individual Issues Offered during August Amount Coupon Type 3/ (millions Maturity rate or Offering Rating of net inter- yield dollars) est cost CORPORATE Consolidated Nat. Gas Co. Public.Serv. Elec. & Gas Houston Corp. Southern Calif. Edison Co. S.F. deb. 1£.0 1983 1st ref.mtg.bds.60.0 1988 Deb.&com.stk. 51*. 2 1968 1st ref.mtg.bds.50.0 1983 li 3/8 h 5/8 5 I 5/8 a.30 L.50 Aaa Aa 55 STATE AND LOCAL GOVERNMENT Philadelphia Sch.ItiLst.,Pa. G.O. Rev.-Rent. Georgia Rural Rds. Auth. Los Angeles, California G.O. New York, New York G.O. Detroit, Michigan G.O. OTHER None 12.0 1960-83 3.28 21.0 1960-79/68 3.72 21.5 1959-88/68 3.63 32.lt 1959-73 3.25 21.7 1959-83 3.58 U l.li0-3.50 A I.7O-3.7O A 1.25-3.85 Aa 1.60-3.29 A 1.50-1|.UO A H.lh 1/ Includes corporate and other security offerings of $15 million and over; State and local government security offerings of #10 million and over. 2/ Includes foreign government and International Bank for Reconstruction and Development issues and non-guaranteed issues ty Federal agencies. 3/ In the case of State and local government securities, G.O. denotes general obligations; Rev.-Ut. / revenue obligations secured only by income from public utilities; Rev.-Q.Ut., revenue bonds secured only by revenue of quasi-utilities; Rev.-S revenue bonds secured by revenue from specific taxes only; Rev.-Rent., revenue bonds secured solely by lease payments. . ; k/ The 3.50 per cent yield is for the 1981-82 maturities. The 1/iis of 1983 were reoffered to yield li.00 per cent. 5/ Offered in units with common stock. Exhibit H H.lU Forthcoming Large Long-term Public Security Offerings for New Capital' (Other than U. S. Treasury) 1/ Expected Proceeds from Forthcoming Large Issues Date of computation 1957 - July 31 Aug. 30 Sept. 30 Oct. 31 Nov. 29 Dec. 31 1958 - Jan. 31 Feb.-28 Mar. 31 Apr. 30 May 29 June 30 July 31 Aug. 29 Subsequent to During month following date shown date shown State and Other 2/ Corporate State and Other 2/ Corporate local govt. local govt. 526 578 576 158 383 378 198 1,123 555 356 266 768 •161 785 218 183 33k 339 363 315 370 13k 298 k93 177 225 55 2lil 30 30 18 150 110 150 36 — . 811 8U5 6k7 815 1,193 1,161 1,378 1,208 670 561 k6k 1,0148 381 911 1*71 379 551 5k 3 558 5614 1487 3kl 330 k93 208 235 125 135 30 15 k$ 63 165 110 150 36 — Forthcoming Large Offerings, as of August 29 Type Amount (millions Approximate date of dollars) of offering CORPORATE Standard Oil Co. of California Texas Eastern Trans. Co. Sears Roebuck & Co. Tennessee Gas Trans. Co. -^Standard Oil Co. of Indiana -"^Public Service Co. of Indiana Deb. 150.0 1st mtg. p. 1. bds. 35.0 S. F. deb. 350.0 1st mtg, p. 1. bds. 5o.o Deb. 200.0 Pfd. stk. 24.3 Universal-Cyclops Steel Corp. Montana Power Co. Commerce Oil Refining Corp. .Martin Co. ' S. F. deb. 1st mtg. bds. Deb., bds. & common S. F. deb. 15.0 20.0 1*5.0 25.0 Sept. 5 Sept. 11 Sept. Sept. Sept. Oct. 6 (riphls expire) 1956 1950 1956 1956 ' STATE AND LOCAL GOVLRKKLNT State of Delaware Indiana State Office Eldg.. Conn. State of Connecticut San Diepo Unif. Sch. Dist., Calif. f-State of Washington G.O. Rev. G.O. G.O. Rev.-S.T. 17.0 30.0 20.0 10.0 10.0 Sept. 3 Sept. 9 Sept. 9 Sept. 10 Sept. 10 „ H. lit H-2 Forthcoming Large Offerings, as of August 29 (Cont'd) Issuer Type Amount Approximate date (millions of offering of dollars) STATE AND LOCAL GOVERNMENT (Cont'd) ^Florida State Board of Education Los Angeles Co. Flood Dist., Calif. *State of Oregon State of Ohio -^Commonwealth of Massachusetts Chesapeake Bay Ferry Comm. State of California Rev. Rev.-Ut. G.O. Rev.-S. T. G.O. Rev.—Ut. G.O. 12.5 30.0 20.0 30.0 61.0 lliii.O 50.0 Sept. 16 Sept. 16 Sept. 17 Sept. 18 Sept. 2k Oct. Dec. 3 iOTHER None *—Included in table for first time. 1/ Includes corporate and other issues of $15 million and over; State and local government issues of $10 million and over. 2/ Includes foreign government and International Bank for Reconstruction and Development issues and non-guaranteed issues by Federal agencies. Note—Deletions for reasons other than sale of issue: None. H.lU Exhibit I Yields on New and Outstanding Electric Power Bonds, Rated Aa and A l / Date 1952 -1927 High Low Aa-rated offering yields A-rated offering yields Amount above Amount above Actual seasoned yields Actual seasoned yields (per cent) (basis points) (per cent) (basis points) 5.00(8/lU/57) 2.93(3/31/51) 1958 - January February March U 5 6 12 19 21 . 25 April 1 2 17 23 29 May 7 13 g 20 21 22 28 June 10 17 25 July 2 9 18 23 *3.60 y 3.891/ U.15 87 -3 -8 22 Loo U.00 uu 50 28 26 U.05 3.98 U.00 31 23 25 1.22 3.75 3.90 21 3.85 3.85 16' 16 3.85 3.82 3.95 17 12 2U U.00 25 W 8 5.50(11/7/57) 3.oo(3/17/5U) 2? . 3.962/ U.07 U.25 U.07 123 -15 3 9 6 -7 3.98 U.OU U.00 11 3 U.07 U.35 U 32 U.00 3.95 -6 -1 3.98^ U.352/ 31 *—Single observation, not an average. 1/ Covers only 30-year first mortgage bonds, as reported in Moody's Bond Survey. Except where indicated, the actual yield figure and the amount above seasoned yields are averages of offerings during the indicated period and of the differences between these new offering yields and yields on seasoned issues of similar quality for the same day. Average maturity for the seasoned issues varies from 26 to 28 years. 2/ Provides for a 5-year period during which issue may not be called for refunding at a lower coupon rate. Monthly averages so marked include one or more issues with such a provision. Other issues have no such provision.