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Published Weekly by the FEDERAL RESERVE BANK of CLEVELAND
to
October 12, 1959
October 6, 1959
TREASURY NarE
ALLorMENT ANNOUNCED
About 100,000 Americans put up more than $800
million to buy the Treasury's new "magic fives"
--the 5% note due in 1964 that was sold on Tuesday. This was disclosed today in the Treasury's announcement of the
results of the offering--results that were highly gratifying to officials. Subscriptions for the $2 billion offering were so heavy
that savings-type institutions were allotted only 45% of their subscriptions, commercial banks only 8% and all other large investors
5%. Total subscriptions were $11 billion. Individuals and other
small investors were guaranteed a full allotment of up to $25,000 if
they paid in cash. There were 107,788 of these subscriptions, totaling $940,569,000, or nearly half the total offering. While
there was no breakdown, all but a few thousand of these investors
were individuals. (Dale, Jr. N.Y. Times, 10/10 p.25)
SAVINGS DEPOSITS DOWN
Heavy withdrawals from savings accounts in
New York City commercial banks, probably in
large part by depositors who used the money to buy 5% Treasury notes,
were evident in figures reported by the New York Federal Reserve Bank
for the week ended Wednesday. Savings deposits in the 15 major commercial banks that ·make weekly reports to the Federal Reserve Bank
were $45 million less Wednesday than on the previous Wednesday. So
sharp a one-week decline is practically unprecedented, according to
Federal Reserve officials. (Wall St. J., 10/9 p.15)
NEW NOI'E
AT PREMIUM
The market for fixed-interest securities marched ahead
strongly in all sectors yesterday, bolstered by enthusiasm for the Treasury's new 5% note. The new four-year,
ten-month obligation rose 8/32 in its second day of trading on a "whenissued" basis to bidside price of 101. The closing price brought the
yield to new buyers down to 4.75%. (Kraus. N.Y. Times, 10/9 p.44)
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Selection of these items does not imply this bank's guaranty of their accuracy,
nor agreement with the views expressed.
IMPACI' OF TREASURY
FINANCING
The Treasury rings down the curtain on
what is undoubtedly a smash hit in its latest
financing operation involving a 5% security with
just under 5 years maturity. The repercussions promise to be extensive. It used to be said that if the Bank of England put its discount rate high enough it would draw money out of the ground; the
Treasury with its 5f coupon on the new note issue seems to have raided savings accounts through-out the nation. Individuals, including
some wealthy free-riders, are rushing in subscriptions which, if
accompanied by cash on the barrelhead, will be allotted in full up to
$25,000. Institutions raided for the necessary cash include savings
banks and savings and loan associations, which are the mainstay of the
mortgage market. If such raids are to be of frequent occurrence
those institutions will have to go slower on mortgage buying. Also
made vulnerable are the Treasury's own savings bonds, which can be
redeemed and the proceeds reinvested in the new marketable issue.
In short,what is going on is more switching of long-term money into
the short-term market, which will accentuate the shortage of longterm capital. (J. of Comm., 10/6 p.1)
Sales of Series E-and H-savings bonds in
September were the lowest in nearly seven
years, and cash-ins topped sales by the
biggest a.mount for any month this year, Treasury figures showed.
Sales of the bonds a.mounted to only about $300 million--the smallest
monthly total since November of 1952. (Wall St. J., 10/8 p.14)
SALES OF E-, H-BONDS
DROPPED TO 7-YEAR LOW
TAFT-HARTLEY ACT USED
TO END STEEL STRIKE
President Eisenhower moved today to end the
crippling steel strike through the national
emergency provisions of the Taft-Hartley Act.
The President signed an Executive Order creating a board of inquiry
to report to him by next Friday. This is the first step toward formal application for issuance of an eighty-day no-strike injunction
in mills that produce 85% of the country's steel. (Raskin. N.Y.
Times, 10/10 p.1)
WORK RESUMES
SLOWLY AT DOCKS
A long holiday weekend is slowing down full resumption of activity at Atlantic and Gulf Coast
docks after a Federal Court stepped in last week
to end the eight-day longshoremen's strike. Unloading of cargoes of
many of the 200 ships tied up in port during the strike, which began
October 1, will not start until tomorrow. Perishables, especially
tons of bananas close to the spoiling point, were the first commodities to be hauled out of the holds and to market when the dockers
returned to their jobs Friday morning. (Wall St. J., 10/12 p.3)
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MACHINE TOOL ORDERS
DROP AGAIN
Machine tool orders in August fell sharply
below the July level--hit by the steel strike
and vacation shutdowns of many industrial
plants. Incoming business declined to $52.4 million--off from $63.4
million in July, though still well above the $28.3 million of August
1958. But officials of machine tool companies continue to be optimistic about the prospect for order gains after the steel strike is settled. Reflecting this attitude, some producers are inching prices upward. (Wall St. J., 10/6 p.1)
Inventory liquidation caused essentially by
the steel strike showed up, as anticipated, in
Department of Commerce figures on inventories
for the month of August. Heavier than usual sales of autos at the
end of the model year, caused a decline in total retail inventories
during the month. The result was that over-all manufacturing and
trade stocks fell by $400 million, seasonally ad.justed, to a level
of $88.5 billion. It was the first inventory decline in 10 months.
At the manufacturing level, the liquidation a.mounted to about $200
million and a like amount of reduction in stocks occurred at the
retail level. Wholesalers' stocks as a whole remained unchanged.
The August liquidation at factories occurred primarily in the metal
and transportation equipment industries. (J. of Comm., 10/7 p.4)
INVENTORIES DECLINED
IN AUGUST
STATES MUST TRIM
HIGHWAY PLANS
The Government told the states that their plans
to build new superhighways with Federal money
would have to be trimmed to fit reduced revenues
used to finance the program. Commerce Secretary Mueller said such
steps were necessary to make sure the big interstate highway program,
9Cf{o of which is paid for by Uncle Sam, continues without interruption
and stays on a pay-as-you-go basis. He chopped $700 million from the
previous allotments of $2.5 billion for the current fiscal year. For
the fiscal year starting next July 1, the Secretary said that the
allotments also would have to be held to $1.8 billion and to $2 billion
the year after that. (Wall St. J., 10/9 p.5)
Increases in cotton cloth prices are being passed
on in the form of higher apparel prices. Brandname white shirts and pajamas that formerly retailed for $4 will definitely cost $4.25 from now on. This became
clear when the three largest producers of men's brand-name shirts
all opened their spring lines without a $4 white lightweight shirt.
News of these adjustments coincided with a batch of advances in
unfinished cotton cloth prices. Af'ter several months of firmness,
a new round of price increases is spreading across a broad front in
MEN'S SHIRT
PRICES ADVANCED
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the primary textile markets for cotton cloth and there are indications that further increases are in the works. (Wall St. J., 10/7
p.14)
CONSOLIDATED EDISON
TO BORROW $100 MILLION
The Consolidated Edison Company of New York,
Inc., announced yesterday that it has arranged
a $100 million line of credit to run from
October 6 this year, to October 5, 1960, with thirteen banks. The
money is needed for the financing of the utility's construction program and the borrowings are planned in anticipation of permanent
long-term financing. Among the projects under construction is a
275, 000-kilowatt nuclear power plant at Indian Point, N. Y. The nuclear plant will be the first such facility to supply the New York
area and is the largest under construction in the United States, a
company spokesman said. (N.Y. Times, 10/6 p.53)
RAIL CARLOADINGS FELL
Railroads loaded 572,502 freight cars in the
week ended October 3, or 2.5i from the previous
week, the Association of American Railroads reported. Since the
steel strike began July 15, the railroads have lost 1,830,000 loadings of freight cars. Loadings so far this year are 4.5i ahead of
the corresponding portion of last year but 14.4% below comparable
1957 loadings. (Wall St. J., 10/9 p.22)
LONDON STOCKS
SEE TORY VICTORY
A record volume of business was done on the stock
exchange here today as investors anticipated a
Conservative victory in today's general election.
Prices of industrial shares surged forward on strong demand, however,
gains were smaller than those on Wednesday because of heavy profit
taking at mid-day after the recent long advance. At one time investors were committing themselves so heavily on a Conservative victory--and consequent removal of the threat of renationalization--that
steel shares were nearly 4 shillings (56 cents) higher. But by the
close most of their gains had been halved. (N.Y. Times, 10/9 p.40)
SHEEP FARMERS varE
Sheep farmers voted overwhelmingly to continue a federally withheld deduction from
their wool price support payments to finance
promotion campaigns for lamb and wool. The referendum was held during September, with each sheep in a grower's flock counting as one
vote. Farmers owning 16,744,406 sheep voted in favor of the checkoff.
This amounted to 81% of the sheep represented. Under the checkoff
program, the Government automatically deducts one cent a pound from
the wool subsidy paid to farmers to make up the difference between
market prices and a Federal "incentive" price. (Wall St. J., 10/7
p.6)
FOR SUBSIDY DEDUCTION
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