Full text of H.16 Capital Market Developments : December 27, 1960

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Not for Publication
H.lk

DECOHTBOLLTti AFTER SIX MONTHS

December 27, I960

(Next issue: January 9, 196l)

CAPITAL MARKET DEVELOPMENTS
IN THE UNITED STATES AND CANADA
Part I - United States
Few security issues were offered during the week preceding
Christmas. Proceeds from two State and local revenue issues aggregated
$77 million; no large corporate issues were publicly offered, but $67.5
million in promissory notes of the New York World's Fair 196^-5 Corporation
reached the market. No large issues are scheduled for the final week of
I960.
Bond yields - Yields on top quality long-term bonds changed
little during the week. Yields on high-grade State and local issues rose
one basis point while those on both corporate and long-term U.S. Government issues remained unchanged. There were further declines in the yields
available on lower grade issues—slight in the case of corporate bonds
but substantial for Baa-rated State and local issues.
Short- and intermediate-term interest rates - Last week, rates
on U. S. Government three- and six-month bills declined moderately, and
a further decline in yields available on three- to five-year issues brought
rates for this maturity to a new low for the year. A sharp decline of
15 basis points was recorded for directly placed finance company paper.
Other short-term interest rates were unchanged.
Mortgage yields - Yields available on FHA new home mortgages
in the private secondary market continued to decline last month and are
estimated at 6.05 per cept in November, down li basis points from the
October average. Average yields available on top-rated new corporate
issues in November were virtually unchanged at i|.59 per cent, and the
spread between mortgage and bond yields narrowed slightly.
Stock prices - On balance common stock prices, as measured by
Standard and Poor's index of 500 stocks, increased slightly last week,
closing on Friday at 57. Ui. Trading remained active with daily volume
averaging 3.5 million shares, down only slightly from the high volume
of the preceding two weeks.
More detailed information concerning recent capital market0
developments is presented in the attached exhibits.
Developments in the Canadian capital markets are presented
in Part II at the end of this report.
Capital Markets Section,
Division of Research and Statistics,
Board of Governors of the Federal Reserve System.




L O N G - T E R M B O N D YIELDS

HIGH-GRADE

f

LOWER-GRADE

Y\j




U.S. GOVERNMENT

11.11*

Exhibit B - Tables for Exhibit A
Long-term Bond Yields
High-grade
Date

Corporate
Aaa 1/

U. S. Govt,
long-term 2/

Spread between
U. S. Govt, and
State and
Corporate
Aaa
local Aaa

State and
local govt.
Aaa y

(Per cent)
Low
High
Low
High
Low
i960 - High
Low

2.85
it. lit
3.55
It. 61
lt.09
it. 61
It. 23

Nov.
Dec.
Dec.
Dec.
Dec.

It. 32
L 33
It. 35
U.3U
1*. 3k

195k
1957
1958
1959

-

25
2
9
16
23 E/

2.15 (8/6)

Uf

i.90 (9/2)

3.06 (3/26)
3.53 (1/7)
2.99 (9/1)

.30
.60
.22
.50
.16
.59
.19

.30
.It?
.3lt
.92
.53
.92
.53

3.12
3.11*
3.11
3.11
3.12

.38
.36
.Ul
.1*8
.1*8

.82
.83
.83
.75
.71*

3.76 (10/16)
3.07 (V25)
lt.37 (12/31)
3.83 (1/2)
1*.'1*2 (1/8)
3.75 (8/5)

in;

3.9h
3.97
3.9U
3.86
3.66
Lower-grade

Date

Corporate
Baa 1/

State and
local govt.
Baa 2/

Spread between
Aaa and Baa
State and
Corporate
local Rovt.

(Per cent)
1951] - Low
1957 - High
1958 - Low
1959 - High
Low
1960 - High
Low

3 . a (12/31)
5.10 (13/29)
li.51 (7/11)
5.32 (12/31)
it. 83 (U/17)
5.36 (2^2)
4.98 (9/9)

Nov.
Dec.
Dec.
Dec.
Dec.

5.08
5.10
5.11
5.10
5.09

25
2
9
16
23 2/

iS 88'
2.93 (8/5)

h.h6

(7/2$
3.92 (3/26)
1*.1*6 (1/7)

3.98 (12/22)

h.07
1*. 07

h.06
1*.06
3.98

.52
1.27
.77

.96

1.21
I98
.79

.81*
.71

1.08

.76
.77
.76
.77
.75

.95
.93
.95
.95

,86

.86

a/ Preliminary.
1/ Weekly average of dally figures. Average term of bonds Inoluded Is 26-26 years. ,
2/ Weekly average of dully figures. The series Instates bonds due op callable In 10 years or more.
3/ Thursday figures. Only general obligation bonds are Ineludedi average tire Is 20 years
Hote.—Highs and lows are for Individual series and mey be en different dates for different series.




4

SHORT-

AND

INTERMEDIATE-

TERM

INTEREST

RATES

GOVERNMENT

PRIVATE

''FINANCE COMPANY

1957




PAFtT

Exhibit D - Tables for Exhibit C
Short- and Intermediate-term Interest Rates
Government
Date

Discount
rate 1/

Yields
6-month
bills 2/

3-month
bills 2/

3-5 year
issues 2/

Spread between yields on
3-month bills and yields on
6-mo. bills 13-5 yr. issues

(per cent)
1951j
1957
1958
1959

Low
High
Low
High
Low
1960 - High
Low
Nov.
Dec.
Eec.
Dec.
Dec.

-

25
2
9
16
23 p/

1.50
3.50
I.75

LOO

2.50
II.OO
3.00
3.00
3.00
3.00
3.00
3.00

.61 (6/11)
3.61* (10/18)

1.66 (V30)
I4.OI4 (10/18)

3.02 (12/26) 2.11* (6/6)

L 5 7 (12/2M ii.91 (12/31) 5.00 ( 1 2 M )

2.63 (2/20) 2.92 (1/2)
L 5 9 (1/8)

5.07 (1/8)

2.38
2.35

2.71
2.70
2.62
2.50
2.12

3.70 (1/2)

2.11 (10/28) 2.39 (8/5)

2.28

2.25
2.2b

L.97 (1/8)
3.16 (12/23)

3.72
3.75
3.59
3.10
3.16

.66

.86

.26

.Olt

.79
.19
.58

1.1*2

.33
.35
.3k
.25

1.01
l.liO
1.31
1.21i
1.22

.10

1.81

.16

.38

.18

Private

Date

Stock Exchange
call loan 1/

Spread between 3-month
Prime
Finance company Treasury bill yield and
rate 1/
finance company
paper ]/
paper rates
(per cent)

—
-

3.00

3.00

5.00

5.00
Loo
5.00

Low
High
Low
High
Low
I960 - High
Low

li.50

Nov.
Bee.
Dec.
Dec.
Dec.

h.&
h.$0
li-50
U.50
U.50

1951i
1957
1958
1959

25
2
9
16
23 2/

24.50
3.50

li.5o
3.50

1*.50

li.50
U.50
L50
li.50
li.50

1.25
3.88
1.13
L88
3.00

(12/31)
(11/15)
(8/8)
(12/31)
(3/6)

5.13 (1/22)
2.88 (11/li)

2.9U
2.9L
3.01
3.06
2.91

0
.59
-.35
.86
.13
1.02
.22

(12/18)
(7/19)
(8/29)
(10/9)
(12/li)
(V#)
(V15)

.56
.59
.73
.81
.67

1/ Weekly rut* shown la that in effect at end of period. Discount rate I* for Federal Reserve Bank of Hew York.
Stock exchange call loan rate ia going rata on call loana secured ty ouatcosrs1 stock exchange collateral at
New York City banks. Prima rata la that ohargud by large banks on short-ten* loins to bualneas borrowers of
the highest credit standing.
2/ Market yield; weekly avern^se computed from dally cloning bid prices. Series of 3-5 year Issues nonnista of
eel sated notes and boiwVi.
3/ Average of dally rates puMlelud by flm.-tue aompanlea for directly placed paper for varying maturities In the
10-179 day ruivt*.
^
( ,
Note.—jl)«he and lows ere for individual saris*.nod way be on different dates for (M ffsrcnt series. For spread#,
high refers to widest, and low to narrowest.'
'




STOCK

MARKET

MORTGAGE

AND

BOND

YIELDS

Monthly


1954
1955


P«f cent p«f annum

1956

1957

195*

1.951

19*0

Exhibit F „ Tables for ExhibiL B
Stock Market

Date

Stock price
index 1/

1957-59 - High
Low
I960 - High
Low

60.51
39.78
59.50
53.32

October
November
Dec. 9
Dec. 16
Dec. 23 e/

53.73
55.it7
56.65
57.20
57.a.

Common
Trading
stock
volume y
yields 2/ (millions
(per cent) of shares)

(7/31/59)
(12/27/57)
(1/8)
(10/21)

Stock market customer credit
Customers111 Bank
debit bal- loans to
ances 4/ '"others" 5/
(Mil]Lions of dollars)

Total

3.07
4.66
3.18
3.62

it.3
1.4
3.9
2.2

4,764
3,554
1,365
4,132

3,401
2,482
3,198
3,004

1,373
1,060
1,167
I,!!!

3.60
3.51
3.itit
3. Uo
3.39

2.6
3.1
3.7
3,6
3.5

it, 294
it, 294
n.a.
n.a.
n.a.

3,133
3,141
n.a.
n.a.
n.a.

1,161
1.153
1.154
1,158

g/ Preliminary.
n.a.—Not available.
1/ Stiuidar^ and Poor's Tmposlte index of 500 oo/rmon stocks, weekly d o s i n g prices, 1941-43=10. Monthly date,
are averageo of daily figures rather than of Fridays' only. Highs and lows are for Fridays' data only.
2/ Standard end Poor's composite- stock yield based on Wednesday data converted to weekly closing price# by
Federal Reserve. Yields shown are for dales on which price index reached its high or low.
3/ Averages of daily trading volume on the New York Stock Exoliange.
4/ 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.
5/ Wednesday figures for weekly reporting member banks. Excludes loans for purchasing or carrying U, S.
Government securities* Prior to July 1, 1959, suoh loans are excluded only at banks in New York and ChiouKO.
Weekly reporting banks account for about 70 per cent of loan* to. others. For further detail sea Bulletin.

Mortgage and Bond Yields 1/

6.21 (1/60)
5.57 (3/59)

4.81
2.74
5.29
4.29
4.49
4.37
4.45
4.60
4.59

6.17
6.13

6.11
6.09
6.05

Spread between new
corporate bonds and

I
1

I960 - July
August
September
October
November

5.63 (11/57)
4.56 (2/55)

Aaa corporate
bonds 1/
New 3/ |Seasoned 4/

I

1953-58 - high
Low
1959-60 - High
Low

FHA
mortgages 2/ •

3
£

Date

.90

1.96
.54
1.76
.83

(6/57)
(3/54)
(9/59)
(2/59)
4.41
1.28
1.25
it. 30
it. 31

-.12
.77

.08

.08

1.68
1.76
1.66

.09

.20

.30
.28

1.49
1.46

\J Neither mortgage nor bond yields take into account servicing coots which are much higher for mortgage a than
bonds. Generally, bonds pay interest eeml-annuallyi mortgages, monthly. Mortgage yields, If computed as equivalent
to a semiannual interest investment, would bo slightly higher than given in the table.
2/ Based on FHA fiold-ofrioe opinions about average bid prices In the private secondary market for new-home
mortgages for immediate delivery. Since late 1955, data relate only to 25-year mortgages with downpayments of 10
per cent or more, weighted by probable volume of transactions. Yields computed by FPU, assuming 25-ycnr mortgages
are paid off Jn 12 year3. Danhed lines indicate periods of adjustment to ohenges In the contractual interest rate.
3/ First National City Bank of New York. Averages of offering yields of all new Issues of publloly-eold bonds
rated M a , Aa or A by Moody's Inventors Service (except serial and convertible issues and offerings of natural gas
and foreign compt.nleo) weighted by olze of Issue. Yields on Aa and A Issues are first adjusted to an Aaa basis

to

™"'Th'""

4/ Moody's Inventors Service,



Monthly averages of dally data.

See Exhibit B.

Exhibit G
Long-term Corporate and State and Local Government
Security Offerings and Placements
(In millions of dollars)
New capital
I960
January
February
March
April
May
July
August
September
October
November
December
1st
2nd
3rd
kth

quarter
quarter
quarter
quarter

1st half
Three quarters
Year

Corporate 1/
1
1 1959

1958

577
715
860

821
738
6k6

728

766
567
1,03k

89k
785
8B?

727
962
738

.

I960

State and local 2/
1
1958
1
1959
812
953
511

739
623
582

69
858
6k6

l,lk0
597
887

731
550
1,033

932
593
1,006

7 ho
703

1,107
5k0
1,11k

572
602
687

ja

798
895
551

k6'5

806
k03
651

2/965
e/875
e/850

879
861
900

862
518
920

2/320
e/500
I/500

519
k55

k56
k7k
k35

2,151
2,367
2,427
E/2,690

2,20k
2,567
1,979
2,612

3,139
2,623
2,760
2,300

l,9k3
2,31k
1,862
e/1,320

2,lk3
2,531
l,5k8
1,571

2,276
2,2hh
1,860
1,365

k,5l9
6,915
E/9,635

k,771
6,750
9,392

5,762
8,522
10,823

k,257
6,119
e/'7,k39

k,67k
6,222
7,793

k,520
6,380
7,7k6

•

Excluding finance companies hj
1st
2nd
3rd
kth

quarter
quarter
quarter
quarter

Year
1/
2/
3/
5/

1,722
2,150
2,017
e/2,290

1,999
2,kl2
1,716
2,503

2,899
2,586
2,731
2,213

E/8,179

8,630

10,k29

2/ Preliminary.
Securities and Exchange Commission estimates of net proceeds.
Investment Bankers Association of America estimates of principal amounts.
Includes $718.3 million AT&T convertible debenture issue.
Total new capital issues excluding offerings of sales and consumer finance
companies.




h.ll,

Exhibit

h

-9-

Other Security OiTerings 1/
(In millions of dollars)
Lonr:-•tern
Foreign government 2/
Federal arency 3/
I960
1
1958
I960
|
1
1959
1
1959

\

January
»' February
\ 1 larch
§ April
1 May
i June

2
175
70

81
60
2

34
72
ko

•58
50
k2

July
August
September

25
1
36

October
November
December

3k

Year

85
1
35 •

33
30
70
547

196
53

175

—

. 5%

148
354

198
120

—

—

164

9
5
17

199

58
123
Ik

160
2/100

96
150

—

220
—-

66

992

2,321

707

Short--term
State and local government h/
' January
February
March

1,1<>3
251

199

182
150
150

'

—

1958

Federal agency 3/

268
345
365

190
128
295

233
160
273

479
475
511

3#
500
489

371
208
lli4

April
May

365
351
297

563
kll
215

357
354
26h

509
632
435

486
075
289

209
161
329

July
Aupust
September

280
505
199

246
167
399

289
423
369

312
468
296

727
365
665 ,

235
343
358

?31
415
243

241
282

733
471
288

1.54
114
137

it,.179

3,910

6,,047

3,090

October
November
December

254
E/M

Year

.

437"
206
330

g/ Prallfilmry.
1/ Data presented in thla exhibit differ frcn thozs In Exhibit E In ttoxt reftindln/; laiuos, mi well as n**
enpital laauqs, e.re included. Long-term e-iouritlea *ra dcflnnd an thoairn.1t1vV.13in more than ono y m r .
2/ Inoludor neourlttcs offered In tho ttr.l ted States by foreign w o v m n n V s and thair ruodlvloions ond by

ln'.ermt'.onal organ), iivtlona. "wirnt

Securlklon and Kxohr.rnjH Coronlsslor..

—

3/ Isauia not ijunrs^ti»d by tho U. S. Go/trnnaiV-. So»irosi lon,>,.»n.i, Securities and Btohaniii Cor.nlniloni
.ihort-term, Fidoral Reserve.
4/ Principally tax and bond anticipation not*s, rnrrnnta or certificates arAPublic Houalrv? Authority
not««. In 30116 ln.itanotia PHA rotes included may h&va a z.wietihit longer tonn thin ona year. S o u r c e t
P o n d Buyer.




-10-

Exhlbit I
Large Long-term Public Security Issues for New Capital
(Other than U. S. Treasury) 1/
Proceeds of Large Issues Offered
(in millions of dollars)

Month

Corporate

State and
local government

1*21
230
279
• 262
38U
309
139
442
303
581
266
566
m

1959 - November
December
I960 - January
February
March
April
May
June
July
August
September
October
November

Other 2/

163
217
388
283
225
370
23k
561
191
298
367
46
186

70
100
320
191
71
28
30
75
25
77
150

Large Individual Issues Offered December 1 through 23

Type y

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

Rating

CORPORATE
Southern Bell Tel. & Tel.
Northern States Pwr. Co.
Potomac Electric Pwr. Co.
Consumers Power Co.
Beneficial Finance Corp.
Public Service Elec. & Gas

Deb.
1st mtg. bds.
1st mtg. bds.
1st mtg. bds.
Deb.
Pfd. stk.

75.0
35.0
ItO.O
35.0
50.0
25.0

1997
1990
1995
1990
1981

5
5
5
4-5/8
4-7/8

4.85
5.00
4.95
4.63
4.95

Aaa
Aa
Aa

2.20-3.65^/
1.90-3.35
1.50-3.65
2.20-3.85
n.r.

A
Aa
Aaa
A

3.40-4.20

A

STATE AND LOCAL GOVERNMENT
San Diego Unif. Sch. Dist.
California
Maryland St. Rds". Comm.
Public Housing Auths.
State of Michigan
State Colleges of Calif.
Okla. City Metro. Improvement Auth., Okla.

Rev.-Ut.
Rev.-Q.Ut.

10.0
12.5
97.6
25.0
14.2

1963-81
3.43
1962-76
3.29
1961-2001
3.49
3.69
1963-84
1962-98 _2.5o

Kev.-Ut.

62.6

1971-2000

G.O.
Rev.-S.T.




n.a.

Large Individual Issues Offered December 1 through 23 (Cont'd)
Amount
Coupon
(millions Maturity
of
net interdollars)
est cost |

It

Type j/

Rating

OTHER
Federal Land Banks
Federal Land Banks
New York World's Fair
I96I4-5 Corp.

Bds.
Bds.

31.0

Prom, notes

67.5

19 61*
1962

L
3-3/8

I4.O8
3.78

6

6.00

—

n.r.—Not reoffered.
n.a.—Not available.
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 by 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 from quasiutilities; Rev.-S.T., revenue bonds secured by revenue from specific taxes
only; Rev.-Rent., revenue bonds secured solely by lease payments.
V
1/k per cent obligations of 1982 were not reoffered.




Exhibit J
Forthcoming Large Long-teim Public Security Offerings for New Capital
(Other than U. S. Treasury) 1/
Expected Proceeds from Forthcoming Large Issues
Date of
computation

Subsequent to
date shown

During month following
date shown
0 t h

Corporate
226
210
207
301
299
202
I183
237

1959 - Nov. 30
Dec. 31
1960 - Jan. 29
Feb. 29
Mar. 31
Apr.. 29
May 31
June 30
July 29
Aug. 31
Sept. 30
Oct. 31
Nov. 30

596

216

576

i*Uo
260

" 2/

Corporate

30
30

1

1,006

%

2J42

70

60
30

IS

836

77
50

2 p

1

ii85
515
310
385
280
258
502
380
32b
283
336

271
280
252
372'
3kh

70
30
hS
35

295
hhS
210
25$
250
2U3
277
180
275
283
212

Other 2/

gff

127
50

Forthcoming Large Offerings, as of December 23
Type

Amount
(millions Approximate date
of dollars) of offering

CORPORATE
Texas Eastern Transmission Corp.
Texas Eastern Transmission Corp.
Lone Star Gas Co.

Pfd. stk.
1st mtg. p.l.bds.
Com."stk.

Brunswick Corp.

Conv. sub. deb.

-^-American Telephone & Telegraph Co.
Commerce Gil Refining Corp.
Liberian Iron Ore, Ltd.
--Realty Collateral Corp.
-"-Montgomery Ward Credit Corp.
Montgomery Ward Credit Corp.

Com. stk.
Deb., bds. & com.
Bds. & stk.
Coll. tr. notes
Deb.
Sub. deb.

15.0
30.0
20.0
25.6
e/800.0
US. o
30.0
20.0
25.0
25.0

Jan. 18
Jan. 19
Jan. 23
(rifhts expire)
Jan. 25
(rights expire)
March
(rights expire)
Indefinite
Indefinite.
Indefinite
Indefinite
Indefinite

STATE AND LOCAL GOVERNMENT •
"Pulton Co., Georgia
(State of Connecticut
fort of New Orleans, La.
Los Anpeles, California
State of California
:-State of Oregon
f-State
of New York




G.O.
G.O.
G.O.
G.O.
G.O.
G.O.
G.O.

lit. 5
29.0
17.0
30.0
95.0
30.0
56.2

Jan.
Jan.
Jan.
Jan.
Jan.
Jan.
Jan.

5
5
9
10
11
17
17

-13-

J-2
Forthccaning Large Offerings, as of December 23 (Cont'd)
Type

Issuer

Amount
Approximate date
(millions
of offering
of dollars)

STATE AND LOCAL GOVERNMENT (Cont'd)
Pennsylvania St. Pub. Sch. Bldg.Auth.
*New York City, New York
*State of Maryland
^Baltimore, Maryland
Los Angeles Dept. of Wtr. & Pwr.,
California
Orleans Parish School Dist., La.
Kentucky Turnpike Authority
Dade County, Florida
New York State Housing Fin. Agency

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

23.0
76.5
20.3
>7.0

Jan. 18
Jan. 2l±
Jan. 2h
Feb.

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

12.0
10.0
55.0
16.0
100.0

Indefinite
Indefinite
Indefinite
Indefinite
Indefinite

OTHER
None

J

*—Included in table for first time.
e/ Estimated.
Includes corporate and other issues of *0.5 million and over; State and local
government issues of $10 million and over.
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: State of New Mexico's
$16.1 million bond issue—secondary sale of bonds held by State investment
accounts.

y
y




Exhibit K
Yields on New and Outstanding
Electric Power Bonds, Rated Aa and A 1/

Date

1952-1959 - High
Low
1959 - July
Aug.
Sept.
Oct.
Nov.
Dec.
1960 — Jan.
Feb.
Mar.
Apr.
May 10
12
25
June 17
28
29
July 8
13
Sept. 15
23
28
Oct. 5
21
Nov. 4
16

'

17

18
Dec.

Aa-rated offering yields A-rated offering yields
Amount above
Amount above
Actual
Actual
seasoned yields
seasoned yields
(per cent)
(per cent)
(basis points)
(basis points)
5.30 (12/8/59) 87
2.93 (3/31/54) -3
*4.93
4.83

.

31
23

5.13^
*5.08
*5.30

36
42
63

5.09
4.82
4.91
h. 88

16
25
37
32

5.65 (9/18/59) 123
3.00 (3/17/54) -15
5.07

17

*5.65
5.33

60
43

&>
4.97
5.14

tJk
ii.78
4.85

25
27

27
17
24
22

9
35

5.10

26

4.95

11

4.93

4.88

4.80

11
8
24

4.88

26

5.05

1*3

5.20
It. 82
4.84

51
28

33

33

hO

7

*—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 nsturity 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
Digitized for with
FRASER
such a provision. Other issues have no such provision.



-15December 27, I960
Part II - Canada
With the announcement of the supplementary budget on December 20,
the spot Canadian dollar endured its sharpest decline in recent years.
The transactions on the bond market were especially large and yields tended
to rise generally. The yield on Treasury bills continued its decline
and, principally due to a sharp increase in the discount on the 3-month
forward Canadian dollar, the net incentive to hold the Canadian bill fell
by over 75 basis points. The Canadian stock exchanges continued to rise
generally through the week ending December 19.
Money market. The yield on Canadian Treasury bills continued
its December decline reaching 3.U6 per cent at last Thursday's auction,
compared with 3.69 per cent in the previous week (see Table). The yield
on the 6-month bill also declined to 3.68 per cent from 3.91 per cent the
week before (see Table). During the week the chartered banks purchased
$18 million of Treasury bills while sales were made by the general public
of $11 million and the Bank of Canada of $5 million; the Government account
sold only S million of Treasury bills (see Table). The average closing
rate on day-to-day loans was 3.10 per cent compared with 3.25 per cent a
week ago.
The spread at last Thursday's auction in favor of the Canadian
over the United States short Treasury bill dedlined to l-.2U.per cent from
the previous week's l.UU per cent (see Table). The discount on the 3-month
forward Canadian dollar increased sharply from 0.35 per cent in the previous week to 0.91 per cent, thus reducing the net incentive for foreign
investors to hold the Canadian bill to 0.33 per cent compared with 1.09
per cent in the week before.
Bond market. Bond yields strengthened in the shorter maturities
in response to heavy sales by the Bank of Canada. Yields in the intermediate maturities eased slightly while yields on bonds of longer maturities
tended to rise (see Table). The spread between selected comparable Canadian
and United States securities (Thursday yields for bills and Wednesday
yields for bonds) were as follows (figures in parenthesis refer to the
previous week):
1.2U
1,26
0.92
1,36
1.5>6

per
per
per
per
per

cent
cent
cent
cent
cent

on
on
on
on
on

a 91-day bill (l.UU)
a 182-day bill (1.U5)
an 8-year bond(0.99)
a 30-year bond (1.37)
a 35-year bond (1.52)

During the week the bond market was active with the Bank of Canada making
substantial purchases of bonds with maturities of over two years and sales
of bonds in the shorter maturities, the net effect resulting in sales of
$9 million (see Table). The general public made net sales of $62 million,
the Government accounts sold $102 million and the chartered banks sold
$23 million.




-16-

The Province of Manitoba has made a $15 million offering of bonds
in two maturities5 $3.5 million, 5-1/2 per cent 5-year bonds at par and
$11.5 million, 5 - 3 A P e r cent 20-year bonds at 99 to yield 5.83 per cent.
New Brunswick Electric Power Commission made a $15 million (U.S.)
offering of 25-year, 5 - 1 A per cent bonds at par, guaranteed by the Province.
Supplementary Budget. On December 20 the Minister of Finance
submitted the supplementary budget to provide for the financing of measures
introduced in November to spur the level of economic activity. It indicates
increased expenditure and decreased revenue with a deficit of $268 million
(see Table). The"hew budget includes measures to discourage borrowing
from abroad by removing preferential tax treatment given to certain foreign
investors and introducing new taxes on such investment. Other new tax
measures were designed to encourage domestic investment.
Stock market. Industrial stock prices on the Toronto exchange
continued to rise through the week ending December 19, while the Montreal
exchange declined slightly at the end of the period. Industrial stock
prices in New York reached their highs for the year during the week.

.

New York
Standard & Poor

Toronto

Montreal

I960 - High
Low

532.56
172.38

271.1
250.3

60.70
55.98

Dec. 12
13
1U
15
16
19

507.38
508.00
509.25
509.U6
510.9U
511.UU

267.U
268.7
268.6
269.3
269.6
268.5

60.3U
60.37
60.31
60.10
60.70
60.62

Foreign exchange. The spot rate on the Canadian dollar fell
sharply upon the announcement of the supplementary budget to 101.28 U.S.
cents last Thursday from 102.25 U.S. cents the week before (see Table).
The discount on the 3-month forward Canadian dollar increased to 0.91
per cent on Thursday from 0.35 per cent in the previous week.

British Commonwealth Section
Division of International Finance
Board of Governors of the Federal Reserve System.




•17-

Selected Canadian Money Market and Related Data
f

3-mo,. Treas. bills
Canada
Spread
g.s^/ over U.S.

: 1959 - High
Low
: I960 - High
Low
Dec. 1
8
15
22

•

6.16
,3.2$
5.1b
1.68

U.U9
2.80
U.63
2.10

3.95
3.70
3.69
. 3.U6

2.33
2.26
2.25
2.22

*

Spot

2.96
0.30
1.62
-0.82

105.51
102.58
105.27
101.2S

1.62
l.bb
l.bb
l.2b

102.22
102.3b
102.25
101.28

Canadian dollar
3-mo. discount (-1
forward premium (+)<y

102.11
102.16
102.16
101.03

Net Incentive to
hold Can.

bills/

0.99
-0.91

1.99
-0.57

-0.U3
-0.73
-0.35
-0.91

1.19
0.71
1,09
0.33

a/ Average yield at weekly tender on Thursday.
b/ Composite market yield for the U.S. Treasury bill on Thursday close of business,
c/ In U.S. cents.
- d/ Spread between spot rate and 3-month forward Canadian dollar on Thursday
closing, expressed as per cent per annum.
e/ Spread over U.S. Treasury bill (column 3)* plus 3-month forward discount or
premium (column 6).
Selected Government of Canada Security Yield#
6-eo. Treas..bill#
spread
Canada

long-term bond#
- p o " year)
135 year)
spread
spread

Intermediate
bond# (8 yr»)
spread

x

mk

1959 - High
Low
I960 - High
Low

6.2b
5.11
5.33
1.99

1.37
-0.86

5.55

b.09

1.11
0.21

Dec. 1
'
8
15
22

U.07
3.92
3.91
3.68

1.37
1.3b
l.b5
1.26

b.72
b.73
b.71
b.69

0.72
0.81
0.99
, 0.92

J

5.27
b.50

5.30

.

b.bb
5.b2
b.63
5.21
5-17
5.18
5.19

0.85

5.05
b.73
5.28
b.68

1.61
0.95

1.28
1.25
1.37
1.36

5.16
5.18
5 »18
• 5.23

1.3b
lobl
1.52
1.56

1.36"

Average yield at weekly tender on Thursday.
Spread between Canadian auction rate and composite market yield of U.S.
on close of business Thursday.
0/ Government of Canada 2-3A per cent of June 1967-68.
y Spread over U.S. Government 2-1/2 per cent of 1563-68.
5/ Government of Canada 3-VU per cent of October .1979.
tj Spread over U.S. Government 3-1/U per cent of 1978-83.
y Government of Canada 3-3A per cent of Septeateer 1996 - March 1998.
5/ Spread over U.S. Government of 199$•




-18-

Canada: Changes In Distribution of Holdings of Canadian
Government Direct and Guaranteed Securities
(millions of Canadian dollars, par value}
Bank of Canada
Treas•
Bonds
bills
Oct. 20
27
Nov. 3
10
17
2k
Dec. 1
8
15
22

Sourcei

+
+
+
+
+
-

27
k
11
1
3
1
10
9
2
5

Government
Total

- U
+ 6
- 5
- 1
+ 10
- 3
+ 3
- 3
+ 1
- 9

+ 23
+ 9
+ 6
+ 2
- 1
+ 8
+ 2k
- k
- 6
-103

Chartered banks
Treas.
Bonds
bills
+
+
+

20
16
8
6
28
30
21
7
13
18

+
+
+
+
+
+
-

,

General public
Savings Treas.
bonds
bills
:Bonds

23
12
19
7
6
3
8
28
5
23

+ 2
+ 3
+ 9
+199
+151
+271
+ U
- k
- 13
- 11

+
+
+
+
+
+
+
-

k
20
6
6
26
29
3
1
19
11

Bank of Canada, Weekly Financial Statistics.

Summary of Canadian Supplementary Budget, December 20, i960
Revised Accounts for Fiscal Year 1960-61
Forecast on
March % 9 I960

Revised
forecast

($ million)
Before tax changes
Total expenditures
Total revenues
Surplus (+) or
deficit (-)
After tax changes
Total expenditures
Total revenues
Surplus (+) or
deficit (-)

$5,880
3,892

$5,980

2,680

-$

300

$2,980
5,6 9k

-$

286

Net cash requirements for the year remain unchanged at $210 million.




+
+
-

U2
2k
17
7
17
5
27
31
k
62