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O f Credit and Business Conditions


o lum e









No. 8

Pressures in the m oney market remained relatively

focused on the refunding of 1 2 ,3 8 8 million dollars of 2 per

steady during Ju ly, despite the sizable flows of funds asso­

cent Treasury notes due A ugust 1 5 and of 5 5 0 million of

ciated with the Fourth of Ju ly holiday and unusually wide

IV2 per cent notes due October 1 . Th e exchange offering

and erratic fluctuations in float.

of a new 2% per cent note to mature A ugust 1 , 1 9 5 7 met
with a favorable initial response and the “ rights” and

Th e effective rate for

Federal funds remained almost steadily at 2 3 per cent
throughout the month, although some trading at lower

“ when-issued” securities were quoted briefly at a premium.

rates took place from time to time. Th e over-all reserve

Price quotations slipped below par during the exchange

position of member banks fluctuated rather widely during

period, when it became apparent that a number of holders

the month, and on the whole w as somewhat easier than

of the maturing 2 per cent notes intended to sell their
securities or present them for cash redemption. Attrition,

expected, m ainly because of a high average amount of float
caused by an unusually heavy volume of checks and delays

according to the final Treasury report, amounted to 8 8 2

in their collection. Reserve positions of N e w Y o r k central

million dollars.

reserve city banks, however, tended to be tighter than in

In sharp contrast, the market for Treasury bills tended

the preceding month, and the rates charged by N e w Y o rk
banks on call loans to dealers in Governm ent securities
were generally at or above those which prevailed in June.

to be buoyant during most of Ju ly ; the average issuing
rate moved down and in the middle of the month reached
the lowest level since M arch. In part the decline early in

The general trend o f longer-term interest rates w as up­
ward, while short-term rates tended to decline until the
latter part of the month.

Ju ly reflected the influence of large System purchases, but

Federal Reserve System holdings of Governm ent securi­
ties showed a net decline over the four weeks from June 2 7

month despite sales from the System ’s holdings. Th e de­

to Ju ly 2 5 of 1 5 5 million dollars, including a net reduction
o f 1 2 5 million in outright holdings and a 3 0 million decline
in repurchase agreements with Governm ent securities deal­
ers. During the week ended Ju ly 4 when member bank
reserves were subject to a heavy drain caused by the sea­
sonal outflow of currency, outright holdings rose by 3 4 8
million dollars, but this rise was more than offset by sales
and redemptions of 4 7 3 million dollars during the three
succeeding weeks.
The market for Governm ent notes and bonds, which had

the strength of nonbank demand w as such as to carry bill
rates even lower during the second and third weeks of the
mand for bills diminished subsequently, however, and
yields rose moderately.
Th e corporate and municipal markets exhibited a heavy
tone during Ju ly, partly because o f an overhang of unsold
issues from the previous month and partly because of a
large volume of new corporate flotations. In addition, these

Money Market in July.................................... . 105

shown mixed movements in June, w as marked by declining

International Monetary Developments......... . 109

prices during most o f Ju ly. Th e growing market opinion

Securities Markets in the First Half of 1956.. . 110

that a renewal of economic expansion after the end of the
steel strike would result in heavy demands for funds and
tighter credit conditions, as well as the large current volume

Monetary and Banking Developments
in Canada ................................................... . 113

of corporate security flotations at relatively attractive yields,

Federal Finances in the Fiscal Year 1956.... . 117

tended to depress the prices of longer-term Government

Selected Economic Indicators...................... . 120


A t the shorter end o f the market, attention



Per cent

Directly placed finance
company paper*
P e
com ercial paper* 1


2.50 — ■ r



below the average for the four statement weeks ended in
the increase of currency in circulation associated with the
Fourth of Ju ly holiday, as well as from a lower average
level of float— which did not, however, decline as much as
is usual at this time of the year. A t the same time holdings

(4-6 months)



{ A
rV\ ,
* i f \A
r i/ ” \


Av /
\ /
\ / V





net borrowed reserves remained close to the levels that pre­
vailed in the last two weeks in June. A verage member
bank borrowings from Federal Reserve Banks amounted
to 7 3 6 million dollars over the four weeks, 5 3 million

* A
/1 \\/ \
/ V M
- * fJ
y v If \ l
* v
Treasury bills
( average issuing rate)


3.00 _

Per cent

E a rly in the month, banks lost reserves as the result of

of Governm ent securities by the Federal Reserve Banks
rose sharply, thereby releasing reserves to the banking sys­


1 .5 0



o n







a m




i WV


Note: Latest data plotted are for July 26.
^ Midpoint of range of rates.

tem. O n balance, average net borrowed reserves were
almost unchanged between the final statement week of
June and the first statement week of Ju ly, and declined
only slightly in the succeeding week.
During the remainder of the month, market factors

tighter credit conditions that depressed the Government

tended on balance to add to the reserves of member banks,
and Federal R eserve security holdings were reduced sub­

bond market. Y ield s on outstanding corporate and munici­

stantially. H owever, member bank reserve positions fluctu­

markets were influenced b y the same anticipations of

pal issues tended upward over the month, several proposed

ated rather widely, reflecting the large midmonth increase

offerings were postponed, and the breaking-up of under­
writing syndicates was frequently marked by price conces­

and subsequent decline in float, the return flow of currency
from circulation in the wake of the Fourth of Ju ly holiday,
and changes in Treasury balances at the Federal Reserve

sions to make slowly moving issues more attractive.
Th e strength of the Treasury bill market was a factor in
the decline in several closely related short-term money
market rates during the month (see ch art). O n Ju ly 5 a
number of the finance companies that place their paper

Table I
Changes in Factors Tending to Increase or Decrease Member
Bank Reserves, July 1956
(In millions of dollars; ( + ) denotes increase,
(—) decrease in excess reserves)

directly with investors reduced by Vs per cent their rates
on paper with maturities up to 2 4 0 days, thus bringing the
range of rates on 3 0 to 8 9-d a y paper to 2 % - 2 % per cent
from a flat 2Vs per cent. A t the same time some dealers
in commercial paper reduced the rates on prime four to
six-month commercial paper by Vs per cent, and a further
reduction of Vs per cent became effective Ju ly 2 0 ; the

Daily averages— week ended
N et





+ 81
-1 3 8
-2 7 8

+ 61
- 62
-1 6 0
+ 11

-1 5 6
- 10
+ 15

+ 35
- 19
+ 33

+ 21
+ 24
-1 4 7
+ 38
+ 29

-3 2 9

-1 4 3





+ 17


-3 3 9




-1 1 3




-2 7 6

-1 8 3







Operating transactions
Treasury operations*...............................
Federal Reserve float..............................
Currency in circulation..........................
Gold and foreign account......................
Other deposits, e tc ...................................

range of rates is now 3V8-3V i per cent as compared with a

T otal............................................

flat 3 % per cent at the start of the month. In each case
these were the first general declines in rates on either type
o f paper since m id -19 5 4 . In contrast, rates on bankers’

Direct Federal Reserve credit transactions

acceptances, which had been reduced by Vs per cent in
m id-June, were raised an equivalent amount on Ju ly 19 ,
bringing the offering rate on unindorsed 90-day accept­

Government securities:
Direct market purchases or sa les..
Held under repurchase agreements.
Loans, discounts, and advances:
Member bank borrowings.................
Bankers’ acceptances:
Bought outright....................................
Under repurchase agreements.........







em ber

B ank R




-3 7 7

-3 5 7

-2 5 2

-1 2 8

+ 138

-1 7 1
+ 37

-1 2 5
+ 36

-2 8 6

-1 2 0


-1 3 4






P o s it io n s

N et borrowed reserves averaged 1 4 0 million dollars dur­
ing the four weeks ended Ju ly 2 5 , down by 6 7 million dol­
lars from the average in the preceding four weeks, as float
remained at unusually high levels throughout the month.
H owever, until the statement week ended Ju ly 2 5 , average

T otal............................................

Effect o f change in required reservesf . . . .

ances to 2 Vi per cent.

Daily average level of member bank:
Borrowings from Reserve B anks. . . .
Excess reservesf........................................

N ote: Because of rounding, figures do not necessarily add to totals.
* Includes changes in Treasury currency and cash,
t These figures are estimated,
t Average for four weeks ended July 25.




596 1


Banks. System holdings of Governm ent securities on an
outright basis were reduced by 4 7 3 million dollars between
Ju ly 4 and Ju ly 2 5 , the cumulative effect being to counter­
act the easing tendencies stemming from other factors.
G o v e r n m e n t Se c u r it ie s M


issued” 2 3 per cent notes reached the market in some size
at or just above par from investors who had apparently
been holding the 2 per cent notes with a view to meeting
early cash needs. Since offsetting demand was light, the
bid price on both rights and when-issued securities declined

Following temporary advances at the beginning of Ju ly,

as much as % 2 ° f a point below par, at which level sellers
tended to hold off. O f that portion of the two maturing

the prices of Government notes and bonds declined almost

issues held outside the Federal Reserve Banks and the

Th e rally at the beginning of the

Government investment accounts, 8 8 2 million dollars was

month was partly connected with the onset of the steel
strike which suggested that economic activity and demands
for bank credit might temporarily slacken; in addition,

retained for cash redemption, a rate of attrition of about

large purchases of Treasury bills by the Federal Reserve

bid at

System were interpreted as confirmation of the willingness
of the System to assist the banks in meeting regular sea­

2 3 , but later m oved down to

without interruption.

sonal pressures on their reserves. A fte r Ju ly 5 , however,

1 8 per cent; the total subscription to the new issue
amounted to 1 2 ,0 5 6 million dollars. Th e new notes were

y32 below

par on a when-issued basis through Ju ly


below par bid in line

with the general decline in Government security prices.

prices turned down and market sentiment became increas­

In contrast to the upward trend in yields on Government
notes and bonds, Treasury bill rates generally m oved

ingly bearish over the rest of the month. T h e wide spread

downward during the first three weeks of Ju ly, following

between yields on long-term Governm ent securities and

a month of near stability. E a rly in the month the market

yields on newly offered corporate bonds w as one factor

w as strongly influenced by the substantial outright pur­
chases of bills by the Federal Reserve System, as well as

tending to depress the Governm ent securities market, as
was the continued large volume of new corporate security
flotations. M arket opinion veered toward the view that,

by the temporary advance in the prices of other G overn­
ment securities. In the Ju ly 2 auction the average issuing

once the steel strike was terminated, a vigorous economic

rate dropped to 2 .4 0 9 per cent from 2 . 5 3 5 per cent in

expansion— perhaps with an inflationary potential— would
develop, and that in consequence credit policy might be­

late June. Substantial demands from investors who had
apparently missed in the auction drove the rate on the

come more restrictive.

longest outstanding bill down to 2 .2 9 per cent (bid) b y

In this environment, offerings of

intermediate and longer-term Governm ent securities by

the close of Ju ly 5 , the lowest level since M arch.

insurance companies, trust accounts, and savings banks

though System holdings o f bills were reduced by over 3 5 0
million dollars in the two weeks ended Ju ly 1 8 , the average

switching into higher yielding corporate securities met with
only limited demand. O ver the month as a whole most
issues maturing after 1 9 6 1

1 2%2
% 2 and

declined by between

and 1 2 % 2 points and shorter issues by between
1 % 2 * The two longest bonds declined by over 2 Vi points.
On Ju ly 1 2 the Treasury announced the refunding terms
for 1 2 , 3 8 8 million dollars of 2 per cent notes due August
1 5 and 5 5 0 million dollars of IV2 per cent notes due O cto­
ber 1 . Holders were offered in exchange for these notes a
new 2 3 per cent note maturing A ugust 1 , 1 9 5 7 . Th e new
notes were dated Ju ly 1 6 with interest adjustments as of
that date, thus providing an immediate increase in the
interest return to holders choosing to make the exchange.
The subscription books were open Ju ly 1 6 through Ju ly 1 8 ,
and the physical exchange was effected on Ju ly 2 5 .
Since the bulk of the maturing \Vi per cent notes was

E v en

issuing rate continued to move down, in part influenced b y
the investment of the proceeds of corporate security flota­
tions, falling to 2 .3 8 7 per cent in the Ju ly 9 auction and
to 2 . 2 3 7 per cent in the subsequent week. In the two suc­
ceeding auctions, however, as nonbank demand tapered off
somewhat and dealers became more cautious over the out­
look for interest rates, the average issuing rate moved up,
first to 2 .3 0 3 per cent and then to 2 .3 7 8 per cent.
O t h e r Se c u r it ie s M


Th e markets for corporate and municipal bonds were
marked by a somewhat heavier tone during most of Ju ly ,
as the volume of current and prospective flotations con­
tinued to be large.

Conditions in these markets also re­

flected the spreading opinion that a renewed upsurge of

held by the Federal Reserve Banks, interest centered on

business activity would develop following the termination

the terms of the exchange of the 2 per cent notes, of which

of the steel strike. Th e reception accorded to new issues

about 5 billion was held outside the Federal Reserve Banks

was mixed and, in a number of instances, the breaking-up

and Governm ent investment accounts. Initial response was

of underwriting syndicates led to markups in yields. A v e r­

generally favorable, and the 2 per cent “ rights” rose above

age yields on outstanding corporate issues, as reflected in

par bid on the day after the exchange was announced.

M oo d y’s A aa-rated corporate bond index, rose b y 7 basis-

A fter the week end, offerings of both rights and the “ when-

points during Ju ly, following near stability throughout



June; yields on similarly rated long-term municipal bonds
also advanced b y 7 basis-points, almost offsetting the de­
cline in the previous month. In each instance the upturn

year thus far, amounted to 6 3 million dollars, com pared
with net borrowings of 2 0 7 million in the four preceding

in yields on outstanding issues represented a reversal from
the downward trend that had prevailed since early M ay.

loans registered a m ajor drop, largely concentrated in the

The estimated volume of publicly offered corporate

week ended June 2 7 and for the most part reflecting repay­

bonds for new capital rose to 5 6 5 million dollars, more
than twice as much as in June. M ost investors held off

ment of loans made b y N e w Y o r k banks to dealers in
Governm ent securities during the preceding week. C on­

In addition to the decline in business loans, security

early in the month awaiting the test of the market that

sumer loans declined b y 2 3 million dollars over the four-

occurred on Ju ly 10 , when a 2 5 0 million dollar issue of

week period ended Ju ly 1 8 , in contrast to increases in

A a-rated A m erican Telephone and Telegraph Com pany

recent months, and real estate loans, which rose 4 5 million,

debentures w as offered to yield 3 . 7 3 per cent. T h e good
reception accorded this issue led to some display of

advanced much less rapidly than earlier this year.

strength, and prices of m any outstanding issues advanced

investment portfolios of w eekly reporting member banks


O ver half of the nearly 1 billion dollar decline in the

Subsequently, however, markets were again

was attributable to a reduction o f 5 3 5 million dollars in

under pressure and several proposed issues were deferred.

holdings of Governm ent securities other than Treasury

Public offerings of municipal bonds amounted to an esti­

bills, partly reflecting the redemption o f maturing tax

mated 2 6 0 million dollars in Ju ly, compared with the un­

anticipation certificates on Jun e 2 2 . Holdings of Treasury

usually large offerings of over 600 million dollars in June.

bills declined by 2 5 8 million and holdings
Governm ent securities by 1 6 2 million.

Dealer inventories remained at high levels throughout the
month, partly in consequence of the heavy June offerings,
and in a number o f cases price concessions were made
with a view to speeding the sale of slowly moving issues.

of non-

Table II
Weekly Changes in Principal Assets and Liabilities of the
Weekly Reporting Member Banks
(In millions of dollars)

The resistance of investors also led to the postponement
of two sizable highway bond flotations that had been an­
nounced earlier. Despite the tapering-off of new issues, the
municipal market remained sluggish toward the end of the

Statement weeks ended


em ber

B a n k C r e d it

Total loans and investments o f weekly reporting member
banks declined 1 .4 billion dollars during the four weeks
ended Ju ly 1 8 , following an expansion of 1 . 2 billion dol­

Total loans adjusted*..

lars in the preceding four weeks. Loans dipped by 4 7 9
million dollars and investments decreased by 9 5 5 million.

U.S. Government securities:
Treasury bills.......... ..

A b ou t half of the decline in total loans was accounted
for by a drop in business loans (including agricultural
million dollars, which was considerably

larger than the 4 million dollar decline in the comparable
period of 1 9 5 5 .



showed relatively small changes, of about the same size
Sales finance companies, which had bor­

rowed heavily from banks prior to the June tax date, made
net repayments of 2 4 5 million dollars, more than offsetting
their borrowing during the week ended June 2 0 ; last year,
repayments by sales finance companies in the comparable
four-week period after the tax date were m arkedly smaller.
Repaym ents by metal and metal products companies,
whose borrowings have been so marked a feature of the


- 80
+ 21

} + 1 ,9 5 0











-2 1 0







+ 2 ,4 8 5

-1 1 3
-3 6 0





— 45
- 42

-2 ,8 6 3

T o ta l...................................
Other securities.............. ..

-4 7 3
- 31





— 87
- 96

-3 ,8 6 0

Total investments..............

-5 0 4





-1 8 3

- 4 ,3 1 9

-7 1 4

-1 0 1



-2 3 0

- 1 ,8 3 4







-1 4 3

+ 2 ,0 2 6

T o ta l loans and in vestm en ts

A sid e, however, from loans to sales

finance companies, the chief categories of business loans

+ 25
— 15



Loans and investments:
Commercial and industrial
Agricultural loan s.. . . . . . . .
Security loans..........................
Real estate loans....................
All other loans (largely

as a year ago.

- 64
-2 1 6
+ 24




loans) of 2 5 9


from Dec.
28, 1955
to July
1 8 ,1956p

Loans to banks.................................




Loans ad ju sted* and “ other”
-2 4 1


-6 9 5

-9 6 2




- 3 ,1 1 2

+ 80

- 26

- 1 ,1 2 9

- 46
-1 4 4



-1 6 4

+ 28


— 273
+ 45




Demand deposits adjusted..........
Time deposits except
U. S. Government deposits.........
Interbank demand deposits:

l +




p Preliminary.
* Exclusive of loans to banks and after deduction of valuation reserves; figures
for the individual loan classifications are shown gross and may not, therefore,
add to the total shown.





T rends


P o l ic ie s

In the United Kingdom, the Chancellor of the Exchequer
late last month urged on the banking community that a
policy of credit contraction be “ resolutely pursued” .
According to the latest statement of the London clearing
banks, advances rose by 6 5 million pounds during the six
weeks ended June 30 , as against only some 0.8 million
during the preceding four-week period. Th e latest increase,

ment some 80 billion francs through bank purchases of
short-term Treasury securities.
R ecent Canadian monetary and banking developments
to the m idyear are discussed elsewhere in this Review .
During Ju ly the chartered banks’ liquidation of govern­
ment bonds, which had accelerated this spring, slowed
down considerably. Business loans, while continuing the
upward trend evident since early 1 9 5 5 , last month ad­
vanced less rapidly and on Ju ly 1 8 were 2 8 .0 per cent

which is attributable in part to the semiannual inclusion of
a number of extraneous items, leaves advances still almost

above a year earlier, as against 2 9 .5 per cent at the end

1 0 per cent below the m id -19 5 5 level. A t the same time
the banks’ liquidity position has improved, with the liquid­

same time, the banks’ indebtedness to the B an k of Canada

ity ratio on June 3 0 standing at 3 3 .6 per cent, as against

of June and 3 0 .5 per cent at the end of M a y .

A t the

continued, and even increased. Security yields, which gen­

3 3 . 2 in m id-M ay and 3 0 .1 on June 3 0 , 1 9 5 5 .

erally had declined during M a y and June, last month
moved upward once more, with the three months’ Treasury

The British Building Societies’ Association, in the face
of continued heavy demand for mortgage credit, recom­
mended to its members that they increase their lending and

bill tender rate rising to 2 .6 5 per cent on Ju ly 2 6 from the
year’s low of 2 .4 0 on Ju ly 5 . Th e chartered banks, after

borrowing rates; these increases, to which six of the largest

the interest rate on savings deposits to

societies already have agreed, involve rises to 6 from
per cent in the minimum rate on new loans, to 3 Vi from

cent, i. e., to the highest level since the early thirties.

3 per cent in interest paid on fully paid shares, and to
3 from 1 V2 per cent in interest on deposits. In response to

having raised their loan rates in A p ril, in Ju ly increased

2 Va

from 2 per

The Chilean authorities, following up the credit restric­
tions set for the first half of 1 9 5 6 (which had provided,
among other measures, for a diminishing rate of monthly

the Treasury’s offer of 4 Vi per cent Conversion Stock
of 1 9 6 2 in exchange for 8 2 4 million pounds of 2 Vi per
cent National W ar Bonds maturing in m id-August, about

allow an over-all July-D ecem ber credit expansion of 1 1
per cent, as against 1 5 per cent in the first half. In Colom ­

80 per cent of the old issue w as tendered (the bulk re­
portedly coming from official p o rtfo lios); this leaves about

bia, the 6 0 per cent supplementary-reserve requirement
against increases in deposits imposed in A p ril was abol­

1 6 7 million to be paid off in cash. Y ield s o f gilt-edged
securities declined somewhat in the first half of Ju ly; the

regulations also put into force in A p ril have apparently

yield of 2Vz per cent Consols fell to 4 .7 4 per cent on

remained unchanged. A t the same time, commercial bank

Ju ly 9, but rose again to 4 .8 3 on Ju ly 3 1 .

credit expansion), now have announced rates that will

ished as of Ju ly 1 ; however, the more restrictive discount

Th e average

reserve requirements were reduced to 1 4 from 1 8 per cent

tender rate for three months’ Treasury bills, which had
stood at 5 . 1 3 per cent at the last June tender, declined to

for sight and to 5 from 8 per cent for all other deposits.

4 .9 8 at the last Ju ly tender.

E xchange R ates

The French National Credit Council last month took its
first action, since the beginning of the current boom in

Sterling rates during the first half of Ju ly fluctuated
within fairly narrow limits in a rather quiet market undis­

Western Europe, to restrain the growing French inflation­
ary pressures. First, the council tightened the instalmentcredit terms for finance companies by raising minimum

tinguished by any noteworthy pressures. Am erican-account
sterling eased during the first week o f Ju ly, moving as low

downpayments to 2 5 from 2 0 per cent and reducing the

affected, either by the Ju ly 3 announcement that Britain’s

lending capacity of such companies to eight from ten times

gold and dollar reserves had risen 1 6 million dollars in

their combined capital and reserves. Secondly, it set com ­

Jun e or by the information that Britain had run a 2 5 . 2

as $ 2 J 9


on Ju ly 6. Th e market w as not noticeably

mercial bank security-reserve requirements at a minimum

million dollar deficit with the E P U . A fte r noon on Ju ly 6

of 2 5 per cent of their demand liabilities; heretofore, these

the rate m oved upward, remaining stronger at about

requirements (which date back to 1 9 4 8 ) had called for
reserves of 2 0 per cent against increases in deposits. Th e

$ 2 .7 9 %

until midmonth, as commercial demand in N ew

Y o rk (prim arily on the part of oil com panies) along with

2 5 per cent requirement will, in effect, alleviate the Treas­

small offerings of dollars in London lent some firmness

ury’s cash position, since it is expected to net the govern­

to the rate.



A lack of substantial activity also characterized the m ar­
ket for other types of sterling during the first half of Ju ly.
Sterling for three and six months’ delivery remained vir­

somewhat, with three and six months’ sterling quoted at
1 Vi and 2Vs cents discount on Ju ly 3 1 . Transferable

tually unchanged at discounts of about 1 % 6 and 2 sy 32

declined to $ 2 . 7 6 1 0 , while securities sterling m oved errati­


The transferable-sterling market also appeared to

cally between $ 2 . 6 9 1 i and $ 2 . 6 6 ^ , with the lower quota­

be rather narrow and quiet, with the rate fluctuating be­
tween $ 2 . 7 7 2 0 and $ 2 . 7 7 4 5 . Securities sterling continued

tion at the month’s end.
Th e Canadian dollar met with good investment demand

to weaken and dropped as low as $ 2 . 6 7 % .

from London and N e w Y o rk as well as commercial de­

A fte r midmonth, however, sterling came under increas­
ing pressure.

G ood demand for dollars in London, par­

ticularly on the part of oil and tobacco interests, along

sterling was under slightly less pressure but nevertheless

mand in N ew Y o r k and m oved as high as $ 1 . 0 2 1 4 early
in Ju ly.

Subsequently the rate remained

quite firm,

although there was some tendency for it to ease in a smaller

with substantial sales of sterling in N ew Y o rk lowered the

market in the closing days of the month; on Ju ly 3 1 the

rate to $ 2 . 7 9 % 2 on Ju ly 2 4 . Such pressures continued
subsequently and, with the development of uncertainties in
the M iddle East, sterling declined further, to as low as

Canadian dollar was quoted at $ 1 . 0 1 2% 2.
The W est Germ an “ liberalized capital” m ark continued

$ 2 . 7 8 x% 2 on Ju ly 3 0 and 3 1 . A t the same time, the dis­
counts on sterling for forw ard delivery tended to narrow

above the rate for the freely convertible mark, with the
rate quoted as high as 2 4 .6 2 cents on Ju ly 2 7 .

to reflect good investment interest and moved substantially

Th e heavy demand for capital funds during the first half
o f 1 9 5 6 placed pressure upon the securities markets and
was reflected in an upward adjustment in the level of bor­

billion dollars, the largest amount in any first six months
on record. A s shown in the table, corporate flotations for

and underwriters of the prospects for long-term interest

financing plant and equipment expenditures were higher
than in the first half of 1 9 5 5 , reflecting the continued up­
trend in business capital outlays this year. A more sub­
stantial increase over 1 9 5 5 occurred in offerings to raise
additional working capital, which was needed mainly be­

rates and to relatively large and frequent swings in prices

cause of rising inventories and record income tax p ay­

and yields of bonds and stocks during the period.

ments. On the other hand, the rise in borrowing costs
made it less attractive for corporations to refinance out­
standing securities, with the result that the volume of re­
funding issues declined m arkedly from the first six months
of 1 9 5 4 and of 1 9 5 5 .

rowing costs. Changing views concerning the future course
o f economic activity, together with recurrent uncertainty in
political affairs, led to frequent reappraisals b y investors

Flotations of both corporate securities and State and
local government issues were larger in the first half of this
year than in the same period of 1 9 5 5 . W hile seasonal net
redemptions of Treasury securities also were greater than
in 1 9 5 5 , a substantial part of these redemptions repre­
sented securities turned in for tax payments and thus did
not release funds for reinvestment in other securities or
for private debt repayment.
M arket reception of the heavy volume of bond offerings

A noticeable shift in the types of securities offered by
corporations to investors occurred during the past half
year; issues of common stock declined both in absolute
Corporate Securities Offered for Cash
(In millions of dollars)

w as highly selective during most of the first half, and
underwriters often encountered difficulty in distributing
new issues at their original offering prices. Sluggishness in




the bond markets was particularly pronounced during
M arch and A p ril, despite widespread price concessions and
increasingly attractive yields in that period. A temporary
improvement in buying interest during M a y and June
brought about a decline in market yields on high-grade
bonds. A t midyear, long-term interest rates resumed their
upward movement.

olum e


O f f e r in g s

The gross proceeds of corporate securities offered for
cash in the first half of 1 9 5 6 totaled approximately 5 .3




Type of security:
Common stock..................
Preferred stock..................
Bonds and notes................







Total gross proceeds___







Purpose of offering:
Plant and equipment.........
Working capital.................
Retirement of securities_
Other purposes..................







Total net proceeds.........







Note: Because of rounding, details may not add to totals shown.
Sources: Securities and Exchange Commission; 1956 partly estimated by the Federal Reserve
Bank of New York.


amount and in relative importance, compared with the
exceptionally large volume of such offerings during the
com parable period of last year, while flotations of bonds
and preferred stocks gained in importance over the first
six months of 1 9 5 5 . A somewhat larger proportion of this

somewhat higher proportion of total municipal offerings
during the recent half year than in the first half of 1 9 5 5 ,
but were still considerably less important than during late
1 9 5 3 and calendar year 1 9 5 4 (see Chart I).

year’s corporate bond issues has been privately placed than

amounted to 10 .0 billion dollars during the first six months
of this year. This amount was twice as much as a year ago,

in the corresponding periods of 1 9 5 4 and 1 9 5 5 .
State and local governments floated 3 . 1 billion dollars of

N et cash redemptions o f Federal Government securities

since tax receipts were higher this year, while Federal out­

long-term bonds during the first half of 1 9 5 6 , an increase


over the 2 .8 billion raised during the same period of last

Treasury security offerings in this period were confined



slightly from

the first half


19 55.

year but substantially less than the record 3 .8 billion in
the first six months of 1 9 5 4 . Revenue bond issues were a

to relatively short-term issues, in contrast to the first half
of 1 9 5 5 , when Federal flotations included a forty-year
3 per cent bond.


Millionsof dollars


T he C ost


B o r r o w in g

Millions of dollars

Borrowing costs and market receptivity to new issues
were subject to rapidly changing influences during the ini­
tial six months o f this year. Broadly speaking, the securi­
ties markets went through three phases, each one lasting
about two months. T h e separate phases are clearly appar­
ent in Chart II, which illustrates the movements in market
yields for seasoned corporate, municipal, and Governm ent
bonds and for industrial common stocks.
During the first phase, roughly from the beginning of the
year to the latter part o f February, market yields on long­
term bonds tended downward. Th e belief appeared to be
widespread at the time that a peak in economic activity
had probably been reached and that a subsequent down­
turn might bring lower interest rates in the future. M ore­
over, uncertainty over the President’s intentions as a candi­
date for re-election had an unsettling effect on investment

Chart 31

Weekly *

Per cent


Per cent


Industrial common stocks

Baa corporate

Aaa corporate^

2.5 -

Long-term Treasury issues +
Aaa municipal

1.5 i i i i i I i i i i i I i i i i i I i i
Sources: Securities and Exchange Commission and Bond Buyer • 1956 partly
estimated by Federal Reserve Bank of New York.


* Weekly averages, except end-of-week data for industrial common stocks
and Thursday close for municipal bonds.
* Old series.
Sources: Federal Reserve Bulletin and Moody’s Investors Service.



markets. The volume of new corporate security issues dur­
ing these months was relatively light, and was generally

end of 1 9 5 5 . M oreover, the yields on some intermediateterm Treasury issues rose temporarily above those on

well received despite the economic and political uncertain­

longer bonds, producing a “ bulge” in the yield curve; for

ties. H owever, there w as an upsurge in State and local
government borrowing during February, and the slow dis­
tribution of the new offerings left large unsold balances
in the hands of municipal bond dealers.
In late February and early M arch , a change in market
climate took place as investors found it necessary to reap­
praise the economic and political outlook. Th e President’s
decision to seek re-election cleared the air of this uncer­

example, on A p ril 1 6 the bid yield on the 2 %

per cent

notes of June 1 9 5 8 stood 1 8 basis-points higher than the
yield on the 3 per cent bonds of 1 9 9 5 .
Th e securities markets entered a third phase in early
M ay , when indications of a slackening of demand for auto­
mobiles and other consumers’ durable goods created the
expectation among m any large investors that at least a
temporary decline in business activity might be in prospect,

tainty, while the Federal R eserve survey of consumer

and that no further credit tightening w as in the offing.

finances gave evidence of consumers’ intentions to m ain­

Buying interest in both new and recent corporate securities

tain a high level o f expenditures during 1 9 5 6 . M oreover,
the joint Department of Com m erce and Securities and E x ­

showed a marked recovery beginning in M a y, and dealers
were able to reduce their swollen inventories. A s shown

change Commission survey of business plans for capital

in Chart II, the decline in yields during this phase was

outlays in 1 9 5 6 imparted an improved tone to the business

centered mostly in Federal securities and municipal bonds.
B y the end of June, average yields on high-grade, seasoned

outlook, and gave rise to expectations of enlarged demands
for capital funds particularly on the part of public utilities

municipal issues registered a decline of 1 7 basis-points
from the peak in early M ay , while the longest-term G o v ­

The markets for new issues of corporate and municipal

ernment bond fell off 1 2 basis-points in yield from the

bonds were characterized b y congested conditions during

earlier high. In contrast, average yields on A a a corporate

the months of M arch and A p ril. Despite higher yields on

bonds declined early in M a y b y only 4 basis-points from

new issues and substantial price concessions on recent

the peak and then remained stable through the end of June,

issues following the termination of some underwriting
syndicates, m any investors preferred to remain on the side­

while average yields on B a a corporate bonds continued to
edge upward during M a y and June.

lines to await still more attractive yields. W ith large un­

In the stock market, dividends-price ratios on industrial

sold balances of municipal bonds in their portfolios,

common stocks tended to m ove in inverse relationship to
bond yields in each of the phases described above. G en ­

underwriters bid cautiously for new security offerings, and
the cost of borrowing rose to the highest level since 1 9 5 3 .

erally speaking, the factors which generated caution among

During this period of market congestion, average yields
on long-term municipal bonds rated A a a b y M oo d y’s In­
vestors Service rose 3 4 basis-points from 2 . 1 7 per cent in
late February to a peak o f 2 . 5 1 per cent in early M a y . The
advance in high-grade seasoned corporate bond yields w as

investors in fixed-yield obligations caused investors in

from 3 .0 7 per cent to 3 . 3 1 per cent, while the yields on
new issues rose even more sharply. In the Governm ent
securities market, the yield on the “ bellwether” forty-year
bonds rose b y 1 3 basis-points between m id-February and
early A p ril; following the raising of discount rates by the

equities to become more optimistic; similarly, when debt
issues rose in investors’ favor, equities tended to decline in
In the early weeks o f the year, common stock prices
sagged, while bond prices firmed. Then, stock prices began
a strong upward climb, moving into new high ground at
about the same time that bond prices reached their 1 9 5 6
lows. A relatively sharp setback in stock prices occurred
during M ay, but a recovery got under w a y in June.

Federal R eserve Banks in m id-April, there was a further

A s shown in C hart II, the dividends-price ratio for

rise of 3 basis-points in yields on the longest Governm ent

industrial common stocks (M o o d y’s series) declined from

bond to a peak of 3 . 1 3 per cent on A p ril 1 7 .

a peak of 4 . 1 3 per cent in late Jan u ary to a low of 3 .6 5

In general, short-term Treasury bill rates m oved up

per cent in early A p ril when stock prices attained their

faster than long-term Governm ent yields in this period;

highs for the first half of 1 9 5 6 . In early M a y , and again

consequently, the trend toward a flattening of the yield

during Ju ly, common stock yields declined slightly below

curve which had developed during the second half o f 1 9 5 5
became even more marked. On A p ril 1 9 , there w as a

the market yields available on B a a corporate bonds.

spread of 3 6 basis-points between the yields on the longest

heavier tone and long-term yields began once more to rise.

N ear the end of June, the bond markets took on a

Treasury bill issue outstanding and the longest Government

Th e large volume of Ju n e offerings of State and local gov­

bond, compared with a spread o f 4 9 basis-points at the

ernment bonds encountered stiffened investor resistance to

prevailing yields, and dealers’ attempts to reduce their
heavy inventories b y cutting prices during Ju ly met with
little success. M arket yields continued to rise despite a
decline in the volume of municipal offerings, and two high­
w ay bond issues scheduled for m id-July were deferred. In
the corporate bond market, the calendar of new issues was


average yields on high-grade corporate bonds reached
3 . 3 3 per cent, a new high for the year, while yields on
long-term Governments were close to their previous peaks.
Underlying these recent changes in the tone of the bond
markets w as the growing market expectation that a renewal
of economic expansion and possibly of inflationary pres­

heavily weighted b y a 2 5 0 million dollar offering of deben­

sures might follow the settlement of the steel strike, and

tures by the Am erican Telephone and Telegraph Com pany

that demands for capital and credit financing would in­

and by several other sizable flotations. A t the end of Ju ly ,

crease in the months ahead.

The Canadian monetary and banking scene during the
past two years has been active indeed. A series of institu­
tional and legal changes have broadened the money m ar­
ket. A t the same time, credit policy has assumed a new
importance in the fostering of balanced economic growth,
in contrast to the earlier postwar years when greater re­
liance was placed on fiscal policy. These changes in the

inoperative; moreover, central bank open market opera­
tions lacked a firm fulcrum, in the form of a stable cash
reserve ratio, against which to exert an effective leverage.
Th e Canadian monetary authorities had long sought to
encourage the growth of a short-term market, and begin­
ning in 1 9 5 3 they took a number of m ajor steps in this

financial fram ework reflect in large measure the increasing

direction. Th e government changed its regular issue of
Treasury bills from a fortnightly to a w eekly tender and

maturity of the Canadian economy, which has shown a
remarkable growth in recent years.1

began issuing nine months’ as well as three months’ bills,
increasing both the total volume of bills and the number

W ith the rapid upsurge in production and employment
after the mild 1 9 5 3 - 5 4

recession, monetary conditions

of maturities available to the market. T h e B an k of Canada


then made its credit available, through repurchase agree­
ments, to government securities dealers willing to take posi­

inflationary strains, however, have remained absent; ac­

tions in the short-term market. T o encourage further the

have gradually changed from ease to tightness.

cordingly the prim ary aim of monetary policy has not been

development o f market intermediaries the B an k of Canada,

to prevent a credit expansion, but rather to match available
funds to the growth of available resources. In pursuing
this aim, monetary policy has gained flexibility and

in its market transactions in Treasury bills, progressively

strength from the new m oney market and from the in­

and discontinued making payment in immediately available
funds for bills purchased from banks, paying instead in
clearing house funds. M oreover, the B an k of C anada

creased scope that it has given for central bank action.
B r o a d e n in g

of the





Throughout the postwar period the absence of a devel­
oped m oney market handicapped open market and dis­
count rate policy in Canada. Th e issuing of Treasury bills
at regular fortnightly tenders, it is true, had begun as early
as the m id -19 3 0 ’s, but the bills were largely held within
the banking system and their volume remained relatively
small. In the absence of a broad bill market, the B an k of
C anada found itself the principal buyer of Treasury bills
from the banks, taking all offerings at a rate closely related
to the latest average tender rate.

C an ad a’s commercial

widened the spread between its buying and selling levels,
instituted a minimum for its individual buying transactions,

opened its wire transfer facilities to dealers to help them
avoid the costs of transferring bills between cities.
In m id -19 5 4 two more important changes were made.
First, the minimum required reserves of the chartered
banks— consisting of notes as well as B an k of Canada
deposits— were altered, as part of a revision of the
banking legislation, from a daily ratio of 5 per cent to a
monthly average of 8 per cent. Secondly, the chartered
banks were encouraged to start making day-to-day loans
to those government securities dealers that were carrying
inventories of short-term government securities.

banks (the so-called chartered banks) not only made use
of Treasury bills to adjust their reserve positions, but also
maintained ample cash reserves in excess of the then 5

T he M





rrangem ents

Thus the banks

Th e Canadian m oney market, unlike those in the United

seldom found it necessary to borrow at the B an k of

States and Britain, is not centered in one city but instead

per cent statutory reserve requirement.

Canada, with the result that the discount rate remained
1 For a discussion of the Canadian banking system, see Monthly
Review, December 1954.

has two main centers, Toronto and M ontreal; in other
respects, it combines certain N ew Y o r k and London fea­
tures. The core of the market consists of twelve jobbers



who, alone among Canadian government securities dealers,

Bank of England advances to the discount houses, in that

maintain continuous quotations in all maturities of Treas­

every jobber to whom this facility is extended m ay draw

ury bills and other government securities up to three years,

upon it at his own initiative. Th e Canadian jobbers, how­

hold portfolios of these m oney market securities, obtain

ever, must stay within their borrowing limits. T h e repur­

day-to-day loans from the chartered banks, and have


access to Bank of C an ada credit in the form of repurchase

discount rate, and are applicable to Treasury bills and


are made

at the Ban k

of C anada

agreements. The chartered banks’ day-to-day loans, made

other government securities with maturities up to three

against the pledge of Treasury bills and government bonds

years; they run up to thirty days, but the jobber m ay ter­

maturing within three years, are the prim ary source of

minate them at any time. Since the bank rate is as a rule

funds for the financing of the jobbers’ portfolios. T h e rates

higher than the day-to-day loan rate, a jobber whose d ay-

on these loans are determined through over-the-counter

to-day loan has been called by one bank and who is unable

negotiations, and are kept competitive with the help of

to replace it by a loan from another bank will not turn to the

two special “ brokers” who serve on a salaried basis as

Bank of Canada until he has exhausted every possibility of

an information center for the batiks. T h e banks report to

obtaining nonbank funds. Central bank accommodation is

these “ brokers” the rate on each new loan, or any revised

also available to the banks as in this country but in con­

rate on an outstanding loan, of one million dollars or

trast to the practice in England, where the discount houses

more. The “ brokers” inform all the other banks accord­

and not the banks borrow from the B an k of England. T h e

ingly but themselves do nothing about matching up supply

borrowing takes the form of seven-day secured advances,

and demand. The day-to-day loan rate from its inception

which means that seven days’ interest would be charged

has generally been below the tender rate for three months’

even if the loan were repaid earlier, and that after seven

Treasury bills, thus enabling the jobbers to earn a small

days the advance has to be renewed.

profit on their carry.
T he total outstanding volume of day-to-day loans ex­

W ith the broadening of the m oney market, the volume
of private paper has increased substantially and today

tended by the chartered banks to the jobbers m ay not

forms an important part of the market.

exceed a maximum determined b y the borrowing limits

issued by finance companies and by large nonfinancial cor­

This paper is

of each jobber. These individual limits take in not only

porations, and has maturities ranging generally from three

the jobber’s day-to-day loans from the banks but also his

months to one year. T h e notes are placed either directly

borrowing facilities in the form of repurchase agreements

or through dealers, and the purchasers are mostly corpo­

with the B ank of Canada. Outside these limits, the jobbers

rations with tem porary surpluses of funds. A t the end of

also obtain financing from nonbank sources in the form of

1 9 5 5 there w as believed to be about 2 0 0 million Canadian

either short-term loans or repurchase agreements.

dollars of finance com pany paper and about 5 0 million of

Th e day-to-day loan arrangements are of course in­

other corporation paper outstanding.

tended to provide the banks with an interest-earning asset

Th e volume of Treasury bills, however, continues to be

through which they can easily adjust their positions, as

more important; on Ju ly 4 the total outstanding was 1 ,6 9 0

well as to provide a source of funds to finance the

million dollars, as against 6 5 0 million at the end of June

jobbers’ inventories. A bank desiring to replenish its cash

1 9 5 4 and 4 2 5 million at the end of Jan uary 1 9 5 3 . O f the

reserves m ay call part or all of its day-to-day loans by noon

current total, some 5 0 0 million is held outside the banking

for payment that day; and, when the borrower replaces this

system, compared with less than 10 0 million at the end o f

loan by a loan from another bank, deposits at the Ban k of

June 1 9 5 4 . Th e Treasury bills are at present mostly three

Canada are transferred to the bank short of reserves from

months’ bills, the tender for nine months’ bills having been

the one with ample reserves. T h e day-to-day loan market

discontinued last Novem ber. Th e weekly tenders are all

in C anada thus resembles that in London, and also has a

on a competitive basis, and are open only to prim ary

function similar to the Federal funds market in the United

distributors— that is, to the banks, the jobbers, and the


other 300-od d securities dealers who take part in the

T h e day-to-day loan market, moreover, offers a

cushion for the entire commercial banking system: when

initial distribution of government securities.

the banking system as a whole is under pressure, it can
transfer this pressure onto the jobbers to the extent that
the jobbers borrow from the B an k of C anada and thus
replenish the reserves of the banking system.

B a n k C r e d it T r e n d s

The day-to-day loan market w as started during a period
of monetary ease when the Canadian economy was going

Th e B an k of C anada repurchase agreements with the

through a mild recession, and the climate thus was favor­

jobbers differ from those in this country, but resemble the

able to a broadening of the money market. Nonbank in­



vestors had ample funds to invest in short-term securities.
Th e jobbers were anxious to enlarge their portfolios, on
which they could earn a profit with what they considered
to be a minimum risk of falling prices. Th e banks, due
to a slack demand for loans, were interested in expanding
their other interest-earning assets. M oreover, the banks

level. Th e banks’ liquidation of government bonds, how­
ever, continued through Ju ly 1 9 5 6 . Altogether, the banks
reduced their government bond holdings from A ugust 2 4 ,
1 9 5 5 to Ju ly 1 8 , 1 9 5 6 by 1 ,3 8 0 million dollars, or 4 2
per cent.

had ample excess reserves even following the introduc­

Th e reduction in the banks’ holdings of government

tion of the 8 per cent statutory reserve requirement.

securities was in part reflected in purchases by other
holders. From late A ugust 1 9 5 5 to Ju ly 1 8 , 1 9 5 6 the

The new money market continued to operate relatively

public’s holdings of marketable government securities rose



by 3 3 0 million dollars, while holdings b y government

although there was some decline in the volume of the

accounts rose by 5 9 million and holdings of the B an k o f

chartered banks’ day-to-day loans.
The changes in the banks’ other assets, however, were

Canada by 60 million. Th e larger part of the decline in
the banks’ government securities portfolios, however,

much more m arked as the downturn in business activity

found its counterpart in a 6 2 0 million fall in the total

gave w ay to a strong upturn. T h e 1 9 5 5 economic upsurge

marketable government debt (the increase in Treasury





did not at first give rise to an expansion of inventories, and

bills being more than offset by the retirement of short-term

bank loans resumed their growth only in A p ril 1 9 5 5 .

notes and other issues), since securities purchased by the

Thereafter the rise in general loans (i.e., excluding loans

government accounts were subsequently retired. T h e re­
duction in the marketable government debt was made pos­

to local governments and certain other special categories)
accelerated. The increase over a year previous amounted

sible b y the government’s strong cash position, arising

to 6 per cent at the end of the second quarter of 1 9 5 5 , and

from large budget revenues and net sales of savings bonds
to the public.

1 2 , 2 3 , and 3 0 per cent at the end of the following three
quarters. The expansion slowed down somewhat in June,
and on Ju ly 1 8 general loans were 2 8 per cent above a
year previous.
A s the banks expanded their loans, an increasing part




e s t r a in t

Open market operations have long been the major cen­
tral banking instrument in Canada, and the changes in the

of their lending took the form of “ capital loans” — that is,

B ank of C an ad a A c t in 1 9 5 4 removed the last formal

term loans to corporations, with a duration of more than
one year, and acquisitions of corporate securities directly

impediments to the central bank’s operating over the
whole range of the government securities market. Discount

from the issuer rather than in the market. In Novem ber

rate policy has come to actively supplement open m ar­

1 9 5 5 the chartered banks agreed with the Ban k of C an ad a

ket operations only since early 1 9 5 5 . W hile the B ank of

to cease making new commitments for such loans, after

Canada discount rate had been changed but twice from

a survey revealed that existing commitments were in excess

1 9 3 5 (when the bank had begun operations) to the begin­

of 4 0 0 million dollars and that new commitments were

sion of the general banking legislation in m id -19 5 4 .
During the early part of the 1 9 5 5 loan increase, the

ning of 1 9 5 5 , it has since been altered five times. Informal
agreements between the central bank and the commercial
banks have also been relied upon; these have been made
possible by the com pact nature of the country’s commer­
cial banking system, which comprises only nine banks,
with nation-wide branch systems. H owever, the power to
vary the minimum cash reserve requirements of the char­

chartered banks were able to continue the expansion of
their government bond holdings that had been under w ay

tered banks that w as given to the B an k of C anada in 1 9 5 4
has so far not been used, as it is intended, according to the

since m id -19 5 4 , but in the summer months of 1 9 5 5 this

Governor of the Ban k o f C anada, only for exceptional

being made at a rate of 5 0 million dollars a month.
A lo n g with the expansion in general loans cam e a rapid
rise in the banks’ holdings of insured residential mortgages,
which the banks were permitted to acquire under the revi­

rise leveled off and in A ugust came to a halt. Since August
1 9 5 5 the banks, in order to satisfy the growing demand for

Throughout the mild economic downturn of 1 9 5 3 - 5 4

loans, have been net sellers of bonds in practically every

the Ban k of C anada pursued a policy o f active ease.

week. A b ou t the same time that the banks began unload­

Treasury bill rates as well as the yields of short and

ing their holdings of government bonds, they also started

medium-term government bonds reached three-year lows

reducing their portfolios of Treasury bills. In Novem ber,

in February 1 9 5 5 (see ch art), leaving the B an k of Canada

however, they began to rebuild their Treasury bill hold­

discount rate far out of touch with the market. B y early

ings in line with their agreement with the B ank of Canada

1 9 5 5 the day-to-day loan arrangements had become well-

discussed below; b y m id-July 1 9 5 6 their bill portfolios

established, and the authorities therefore thought it desir­

were some 3 0 0 million dollars above the August 1 9 5 5

able, by instituting a more flexible discount rate policy, to



(Yields as ofapproxim atem idm onth)

to deposits, to be maintained during each month from
June 1 9 5 6 on. Such a ratio, it was said, would in the future
make monetary restraint measures more quickly effective,
since the banks would no longer be as free to liquidate
their Treasury bill holdings in order to satisfy a growing
demand for loans and would have to start selling longerterm government securities sooner.
A fte r the turn of the year a slight easing, partly seasonal,
occurred in monetary conditions, but the upward m ove­
ment in interest rates was quickly resumed, and on A p ril 4 ,
1 9 5 6 the discount rate was raised to 3 per cent. B y the
beginning of M a y the Treasury bill rate reached an alltime peak of 2 .9 1

per cent and other market rates

approached the highs of late

19 5 3 .

M eanwhile,


pattern of Canadian yields changed m arkedly, with the
+ A veragetender rate.
Source: BankofCorvado.Statistical Summary.

three to five-year yields standing above the long-term
yields, while the spread of Canadian interest rates above
United States rates again widened significantly.

prepare for possible borrowing from the central bank in


quently, interest rates eased somewhat, but the banks re­

the event of a tightening of monetary conditions: the dis­

sumed their borrowings from the B an k of C anada and

count rate was accordingly reduced to IV2 from 2 per

their average cash ratio remained close to the minimum.

cent on February 1 4 , 1 9 5 5 in order to bring it into closer

N ot only are market interest rates now well above the 1 9 5 5

alignment with short-term market rates.

lows, but the chartered banks’ loan rates and their rates

During the following months, monetary policy can be
said to have been directed at moderate ease, and the banks

on savings accounts have also been adjusted upward, m ark­
ing a departure from the tradition of rate stability.

were able to add to their reserves. However, as deposits
increased, the banks’ average cash ratio fell to a new low

T h e P r e s e n t Sit u a t io n

of 8 .3 per cent b y June, com pared with 8 .7 in the first
the third quarter of 1 9 5 5 , monetary policy became, accord­

In its present form the Canadian money market has been
operating for only two years, but during this relatively
short period it has functioned fairly smoothly and, more

ing to the Ban k of C an ad a’s annual report, “ one of offer­

particularly, it has come through its first period of tight

ing increasing resistance to further [credit] expansion” .
Reflecting the rise in market interest rates, the discount
rate was increased to 2 per cent on A ugust 5 . Credit policy
apparently became somewhat more restrictive in the fourth
quarter, interest rates continued to rise, and the discount
rate was raised in two steps to 2 % per cent. Th e chartered
banks and the jobbers had some recourse to B an k of
C anada credit during most of this time, a practice hitherto

money reasonably well. Appropriate instruments are avail­
able for the successful operation and development of the
market, and the banks, the nonbank investors and bor­
rowers, and the jobbing intermediaries have all shown

quarter, and short-term interest rates rose noticeably. In

rare in Canadian banking history.

marked interest and ability as participants. Som e technical
problems still remain, but with the passage of time the
market continues to acquire more experience and greater
adaptability to changing economic conditions.
W hile the broadening of the market has undoubtedly

M eanwhile, the B an k of C anada reviewed general credit

increased the effectiveness of credit policy, monetary re­

developments with the chartered banks, and in Novem ber

straint has faced various problems. In particular, the char­

made three requests of the banks pertaining to their opera­

tered banks follow the general practice of making rather

tions. First, the Ban k o f C anada suggested that applica­

large advance loan commitments to their customers, with

tions “ for new and increased credits should be examined

the result that monetary restraint is reflected in bank loans

very carefully, and existing credit limits surveyed with a

only after some delay.

view to maintaining control over future growth” . Secondly,

change rate has given the Canadian authorities a certain

M oreover, while the floating ex­

the Bank of C anada obtained, as already noted, the agree­

degree of freedom in their conduct of credit policy, the

ment of the banks to stop making new commitments for

interaction of the Canadian with the United States securi­

term lending. Finally, agreement w as reached on the adop­

ties market tends to impose a limit on the tightness that

tion of a minimum daily average ratio of 1 5 per cent of

the B an k of C anada can enforce on the market in C anada.

liquid assets— cash, day-to-day loans, and Treasury bills—

W henever the spread between Canadian and United States

interest rates widens, there are always some Canadian bor­
rowers who turn to the United States market, and at the
same time United States funds flow to Canada. O n the
other hand, this close link with the United States tends to
provide a cushion for the Canadian balance of payments,
and is a considerable advantage in the continued expan­
sion of the Canadian economy.
Although the policy of credit restraint has not led to a


supply. M oreover, it has led to a reduction in banking
liquidity, so that a further slowing-down in loan expansion
seems in prospect, particularly since loan commitments
are being worked off. Th e reduced general availability of
funds has been felt throughout the economy, and seems to
have led to a postponement of some capital expenditures.
So far the pressures of excess demand have not been ex­

decline in bank loans— and was not intended to do so—

treme, and the moderate monetary restraint exercised till
now has succeeded in keeping the financial expansion

it has significantly slowed down the expansion of the money

reasonably well within the limits of physical growth.


sharp increase in Federal tax receipts enabled the

Government to close the fiscal year 1 9 5 6 with surpluses

ing a tax cut until the surplus becomes more ample, or
until there is no longer any risk that a tax cut would have

of 1.8 billion dollars in the conventional administrative

undesirable inflationary effects.

budget and 5 . 1 billion dollars in the consolidated cash

The following review of the fiscal-year results, as well

budget. Save for a cash surplus of less than 5 0 million dol­

as the accom panying charts and statistical tables, is based

lars in the fiscal year 1 9 5 2 , the Federal Governm ent has not
had either a budget or cash surplus since the fiscal year

upon the Federal Governm ent’s cash rather than its budget

1 9 5 1 , when the post-Korea rise in tax receipts exceeded
the increase in Federal defense spending (see Chart I ) .
L a st year’s surplus coincided with an advance in the

accounts. Th e cash accounts are generally believed to be
more satisfactory than the budget accounts for purposes
of economic analysis, because they exclude intragovern­

gross national product to the highest level in the nation’s

mental transfers and present the consolidated results of
budget, trust fund, and Governm ent agency transactions;

history. In retrospect, it appears that the surplus— and the

thus, the cash accounts provide an all-inclusive measure of

modest amount of debt retirement which it permitted—

the flow of cash payments and receipts between the public

had a stabilizing influence on the econom y. Together with

and the Federal Governm ent. Th e surplus or deficit in the

the Federal Reserve policy of credit restraint, the excess

cash accounts (as reported in the Daily Statement of the
United States Treasury) , when adjusted for changes in the

of receipts over expenditures in the Governm ent’s accounts
helped to control inflationary forces. W hile the expectation
of a surplus stimulated discussion in some quarters of pos­
sible tax reduction, the continued operation of the economy
at close to capacity reinforced the arguments for postpon-

cash borrowing or debt redemption.1

C ash In c o m e

In the fiscal year which ended Jun e 3 0 , Federal cash


Billions of dollars

Treasurer’s balance, indicates the amount of net Federal

Billions of dollars

income was b y far the highest on record. E v e n though
important tax reductions were made two years ago, the
growth of the tax base since then has more than offset the
effects of the lower rates. From a level of about 7 1 . 5 bil­
lion dollars in the fiscal years 1 9 5 3 and 1 9 5 4 , cash receipts
declined to about 68 billion dollars in the following year
and then rose to 7 7 billion dollars in fiscal 1 9 5 6 .
A s shown in Table I, every category of Federal income
increased in fiscal 1 9 5 6 . O f the total increase of 9 .3 billion
dollars, 3 .7 billion was in individual income taxes (with­
held and nonwithheld), 3 . 1 billion was in corporate income
taxes, and most of the remainder was divided between
excise taxes and old-age and railroad retirement taxes.
F o r the most part, these increases in receipts were a re­
sponse to the substantial expansion of the tax base with the
improvement in business conditions during the year.

Sources: Daily Statement of the United States Treasury and Treasury Bulletin.

1 The Daily Statement excludes certain net expenditures and bor­
rowing operations of Government-sponsored enterprises.



Chart II

j;:;-*:] Corporate income taxes
Y///\ Individual income taxes
m Other receipts

Defense and related ^
International finance
Other expenditures

Billions of dollars

Billions of dollars
—t SO

so r

upward adjustment of Government salaries in the summer
of 1 9 5 5 , while the rise in benefit payments can be attrib­
uted to the liberalization of benefit rates and the continued
growth in the number of retired persons eligible for social
security payments.

Veterans benefits also increased in

fiscal 1 9 5 6 . On the other hand, unemployment payments
declined, owing to the shrinkage in covered unemployment
as the economy advanced to near-capacity operations.
Expenditures by the Com m odity Credit Corporation
(C C C ) amounted to 3 .8 billion dollars in fiscal 1 9 5 6 ,
which is higher than in the year before. N ear-record
agricultural output in the calendar year 1 9 5 5 was accom ­
panied by only modest increases in domestic and foreign

Federal price-support activities through C C C

operations helped to stem the price decline for basic crops.
The cost of servicing the public debt in the fiscal year


1 9 5 6 increased by about 4 0 0 million dollars, to 5 . 1 billion
dollars, partly because of a somewhat larger average debt








* For items included, see Table I.
Sources: Daily Statement of the United States Treasury and Treasury Bulletin.

during the year and partly because of higher interest rates.
The computed average annual interest rate on the public
debt advanced from about 2 .3 per cent in the fiscal year
1 9 5 5 to 2 .5 per cent last year.

Despite the reductions in individual income tax rates
which were made on Jan uary 1 , 1 9 5 4 , receipts from this

P u b l ic D


T r a n s a c t io n s

tax were higher in the fiscal year 1 9 5 6 than in 1 9 5 3 , which
was the previous best fiscal year (see Chart I I ) . F o r cor­
porate income taxes, however, the rise in fiscal 1 9 5 6 was

Th e amount of publicly held Federal debt (including
agency obligations) w as reduced by 4 .8 billion dollars in

not quite enough to compensate for the loss of revenue

Table I
Cash Income and Expenditures of the Federal
Government, Fiscal Years 1955 and 1956

attributable to the repeal of the excess profits taxes as of
Decem ber 3 1 , 1 9 5 3 .
Th e fiscal year 1 9 5 6 w as the first full year in which the
broadened earnings base and coverage under the Social
Security Amendments of 1 9 5 4 were effective. A s a reflec­
tion of these legislative changes, the increase in receipts
was proportionally larger for old-age taxes than for any
other tax category.
C a sh E x p e n d it u r e s

C ash expenditures increased by about 2 billion dollars
in the fiscal year 1 9 5 6 , but at 7 2 billion dollars they were
still well under the post-Korea peak of nearly 7 7 billion
dollars in the fiscal year 1 9 5 3 .
A s illustrated in Chart II, since 1 9 5 3 there has been a
sizable cutback in defense and related expenditures, which
has been partly offset by increases in other expenditure

(In billions o f dollars)




Cash income— total........................................



+ 9 .3

Withheld income taxes.........................................
Non withheld income taxes..................................
Corporate income taxes........................................
Excise taxes...............................................................
Old-age and railroad retirement trust funds.

2 1 .2
1 0 .4
1 8 .2
9 .1
5 .9
1 .2
5 .2
- 3 .4

2 4 .0
1 1 .3
2 1 .3
1 0 .0
7 .0
1 .4
5 .8
- 3 .7

+ 2 .8
+ 0 .9
+ 3 .1
+ 0 .9
+ 1 .1
+ 0 .2
+ 0 .6
-0 .3



+ 2.1

4 0 .9
4 .7
4 .1
3 .4
5 .0
2 .0
7 .9
0 .2

4 0 .1
1 .5
5 .1
4 .6
3 .8
6 .1
1 .4
9 .1
0 .3

- 0 .8
- 0 .2
+ 0 .4
+ 0 .5
+ 0 .4
+ 1 .1
- 0 .6
+ 1 .2
+ 0 .1


+ 5.1

+ 7 .2

All other receipts.....................................................
Less: tax refunds....................................................

Defense and related*.............................................
International finance and a id t ..........................
Interest on debt.......................................................
Veterans Administration.....................................
Commodity Credit Corporation.......................
Old-age and railroad retirement trust funds.
Unemployment trust fund..................................
All other expenditures..........................................
Clearing account......................................................

Net cash income ( + ) or deficit (—) t ..........


categories. From 1 9 5 5 to 1 9 5 6 , however, the reduction in

Note: Because of rounding, figures do not always add to totals.

defense and related expenditures w as very small, and the

* Military outlays by Defense Department and expenditures for strategic and
critical materials, military assistance under M utual Security Act, Atomic
Energy Commission, maritime activities, the Coast Guard, defense production
activities, and redemption of Armed Forces Leave bonds.
t Economic and technical assistance and “ direct forces support” under M utual
Security Act and net redemption of notes issued to International Monetary
X On the basis of the series entitled “ Receipts from and Payments to the Public” ,
the fiscal 1955 cash deficit was 2.7 billion dollars; data on this basis for fiscal
1956 are not as yet available. The difference between that series and the data
given in the table is accounted for chiefly by net payments by Governmentsponsored corporations from cash balances held outside the Treasury. The
latter payments are not reported in the Daily Statement.
Sources: Based on Daily Statement o f the United States Treasury and Monthly

rate of these expenditures in the most recent months
showed little change from a year ago.
A ccording to the tabulation in Table I, the largest in­
creases in expenditures in the fiscal year 1 9 5 6 were for
old-age and railroad retirement benefits and for “ all other”
expenditures (which include the regular operating costs of
the Governm ent).

The latter increase partly reflects the

Statement of Receipts and Expenditures of the United States Government.



the fiscal year 1 9 5 6 . This amount is somewhat less than
the cash surplus because 3 0 0 million dollars of the surplus
was added to the Treasurer’s balance (see Table I I ) .
Exclusive of agency borrowing, net cash debt redemption
was 5 .5 billion dollars.
Only part of the cash debt redemption, however, repre­

bill issue and an 8 2 0 million additional issue of the fortyyear bonds originally floated in February 1 9 5 5 .
A b ou t 2 9 billion of maturing issues during the fiscal
year were refunded into new issues of short or intermediate
maturity; the longest original maturity among the new
securities offered in exchange was two and one-half years.

sented a reduction in the gross public debt. A t the same

Due to the preponderance of short-term securities in the

time that the Treasury w as retiring publicly held debt, it

exchange offerings, the average maturity of the marketable

was also borrowing 3 .8 billion on a noncash basis, mainly

debt was reduced by six months during fiscal 1 9 5 6 to five

in the form of increased liabilities to the trust funds (see

years and five months.

Table I I ) . Thus, the reduction in the gross public debt
during the fiscal year was limited to 1 .6 billion dollars,

maturity had

from 2 7 4 .4 billion dollars to 2 7 2 .8 billion. This decline
marked a reversal of the generally rising trend of the public
debt since the fiscal year 1 9 5 1 .
The cash debt redemption in fiscal 1 9 5 6 included 1.9
billion dollars of Savings notes, 1 . 2 billion (net) of Savings
bonds (at issue p rice ), and almost 1 . 7 billion of market­
able and other miscellaneous issues.


During fiscal 1 9 5 5 , the average

increased by

Se a so n a l F a c t o r s




T r e a s u r y F in a n c in g

In fiscal 1 9 5 6 , as in other recent fiscal years, the
Treasury’s cash requirements underwent marked seasonal
swings. In the first half of the fiscal year (July-D ecem ber
1 9 5 5 ) the Governm ent incurred a cash deficit of 6.9 billion
dollars, while in the second half (January-June 19 5 6 ) there

T h e retirement of

was a cash surplus of 1 2 .0 billion. Th e first half’s deficit,

matured Treasury Savings notes just about closes the

along with the Treasury’s cash requirements to cover the

T reasury’s books on borrowing through such securities.

attrition in refundings and net redemptions in miscellane­

None has been sold since October 1 9 5 3 , and at the end of

ous debt operations, w as met partly through drawing down

fiscal 1 9 5 6 less than 2 0 million remained to be redeemed.

the cash balance accumulated in the preceding six months

Flotations of new marketable issues (excluding the

and partly through new money offerings aggregating 8.8

roll-over of regular Treasury bills) totaled 3 8 .3 billion

billion dollars. T h e second half’s cash surplus, on the
other hand, went to retire debt (mostly tax anticipation

dollars in fiscal

1 9 5 6,2 or about one-third below the

volume in the prior fiscal year.

O f the 1 9 5 6 total, 8.8

billion represented new money borrowing.

M ore than

series) held by the public and to restore the Treasury’s

three fourths of the new m oney issues consisted of tax

Th e largest seasonal swing in Federal tax receipts dur­

anticipation securities, and the remainder was obtained

ing fiscal 1 9 5 6 occurred in corporate income taxes. Out

through an increase of 1 .3 billion dollars in the weekly

of total corporate tax receipts of 2 1 . 3 billion dollars, the








2 The flotations included about 500 million dollars of l}/2 per cent
January-June period, with as much as 7 0 per cent being
notes (Series EA and EO) issued by the Treasury in exchange for
Investment Series B bonds.

received in two months alone— M arch and June.


seasonal concentration of corporate tax payments is the
result of the M ills plan, which starting in 1 9 5 1 gradually
compressed corporate tax payments into the six months

Table II
Federal Cash Operations and Changes in
Debt* Fiscal Years 1955 and 1956
(In billions o f dollars)

immediately following the close of each corporation’s tax­



Cash surplus ( — ) or deficit (~1~)........................





Change in Treasurer’s balance.................................


0 .5


0 .3

1 .6


Equals: N et cash debt redemption ( —) or borrow­
ing ( + ) from the public........................................
N et sales of securities of Government
Equals: Net change in gross public debt held by the
Net investment by Government agencies and
trust funds....................................................................
Net accruals of interest on Savings bonds..........
Other noncash borrowing............................................


4 .8


Equals: Net reduction ( — ) or increase (+ ) in gross

public debt......................................................
Memorandum (end of year):
Gross public debt.......................................................................
Debt subject to ceiling............................................................
Treasurer’s balance...................................................................

0 .7
0 .9


1 .6
0 .5
0 .1



5 .5

of $ 10 0 ,0 0 0 in two equal instalments in September and
December of 1 9 5 5 , and to pay the remainder of their 1 9 5 5

3 .2
0 .4
0 .2


taxes in the following M arch and June. Increasingly larger


four years, until finally the larger corporations will be p ay­

current-year payments will be required during the next
ing almost half of their taxes in the second half of their

2 7 4 .4
27 3 .9
6 .2

N ote: Because of rounding, figures do not always add to totals.
Source: Daily Statement o f the United States Treasury.

0 .7

able year. Th e “ current paym ent” provision of the Internal
Revenue Code of 1 9 5 4 , however, will effect a progressive
adjustment in this paym ent schedule. Under this provi­
sion, calendar-year corporations were required to remit
10 per cent of their estimated 1 9 5 5 tax liability in excess

2 7 2 .8
2 7 2 .4
6 .5

taxable year and the balance in the six months after the
close of the year.

Th is change will bring about a more

even distribution of tax receipts during the fiscal year and
thus reduce the Treasury’s need for seasonal borrowing.



Individual income tax receipts are characterized by a
milder seasonal pattern. W hile the major share of these
taxes is subject to current withholding arrangements, or is
collected through quarterly payments of estimated non­
withheld taxes, receipts continue to be somewhat clustered
in the Jan uary-Jun e period because final returns for the
preceding year, as well as three of the four quarterly p ay­
ments of estimated taxes, are received then.
The influence o f these intra-fiscal-year fluctuations in
receipts on the public debt is illustrated in Chart III for the
period 1 9 5 3 - 5 6 . O n a quarterly basis the public debt
reached a high at the middle of each fiscal year. During
fiscal 1 9 5 6 Treasury borrowing to cover the first half’s
deficit raised the debt subject to statutory limitation to
2 8 0 .3 billion dollars on Decem ber 3 1 , or slightly under
the temporary ceiling of 2 8 1 billion dollars then in effect.
The debt subject to ceiling w as reduced b y about 8
billion dollars during the January-June period of surplus
financing. A t 2 7 2 .4 billion dollars on June 30 , such debt
was well under the permanent ceiling of 2 7 5 billion which
then became effective. Because the debt subject to ceiling
was 1 .5 billion dollars less than a year earlier, and because
a budget surplus is expected for the fiscal year 1 9 5 7 , the
Adm inistration requested a lowering of the temporary ceil­
ing to 2 7 8 billion dollars. This request was enacted into
law on Ju ly 9, to remain in effect through June 30 , 1 9 5 7 .

Chart in

Billions of dollars
300 r


5 D . M J S D M J S
* The statutory limitation of 275 billion dollars has been in force since
June 26, 1946. It was temporarily increased, by an act approved August
28,1954, to 281 billion until June 30,1955. An act approved June 30,1955
continued that temporary increase to June 30,1956. An act approved July 9,
1956has set the new temporary ceiling at 278 billion until June 30,1957,
'J New temporary ceiling,
+ Includes debt held by the Federal Reserve System.
® Partly estimated by the Federal Reserve Bank of New York.
Source: Treasury Bulletin.

United States and Second Federal Reserve District
Percentage change




M ay



Latest month Latest month
from year
from previous


Production and trade
Industrial production*.............................................................................
Electric power output*. . ........................................................................
Ton-miles of railway freight*................................................................
Manufacturers’ sales*...............................................................................
Manufacturers’ inventories*..................................................................
Manufacturers’ new orders, to ta l*......................................................
Manufacturers’ new orders, durable’ goods*...................................
Retail sales*..................................................................................................
Residential construction contracts*....................................................
Nonresidential construction contracts*............................................
Prices, wages, and employment
Basic commodity pricesf.........................................................................
Wholesale pricest.......................................................................................

1 9 4 7 -4 9 1 9 4 7 -4 9 1947-49 billions of
billions of
billions of
billions of
billions of
1947-49 =
19 4 7 -4 9 =

2 7 .7 p
4 9 .1 p
2 8 .1 p
1 4 .4p

1947-49 19 47 -49 =
19 47 -49 =
billions of
19 47 -49 =


8 8 .3
1 1 4 .2p
11 6 .2
3 2 4 .2p
1 6 ,828p
40 . lp
2 ,9 2 7

millions of $
millions of $
millions of $
millions of $
millions of $
1 947 -49 = 100
millions of $

Personal income (annual rate) *11.........................................................
Composite index of wages and salaries*...........................................
Nonagricultural em ploym ent*!............................................................
Manufacturing em ploym ent*!..............................................................
Average hours worked per week, m anufacturing!.......................


1 0 5 ,080p
76 ,4 8 8
1 3 5 .6p
2 8 ,8 9 0

2 7 .8
4 8 .6
2 8 .9
1 4 .9
1 5 .9p

2 7 .2
4 8 .0
2 7 .8
14 .1
1 5 .5

2 7 .1
4 3 .8
2 7 .8
1 4 .0
1 5 .3


9 0 .4
1 1 4 .4
1 1 5 .4
3 2 2 .8
4 0 .0
2 ,6 0 8

9 1 .8
1 1 3 .6
1 14.9
3 2 1 .7
5 1,327
1 6,9 1 8
4 0 .3
2 ,5 6 4

9 0 .2
11 0 .3
11 4 .4
3 0 6 .0
50 ,0 7 3
4 0 .7
2 ,6 7 9




7 3,570p
8 6 ,030p
1 0 4 ,190p
30 ,6 2 9
79 ,7 6 0
2 8,591

8 5 ,3 4 0 p
1 0 6 ,llO p
3 0 ,5 5 1
7 5 ,5 4 8
13 8 .8
2 8 ,2 6 0

8 0 ,0 8 0
75 ,1 8 3
30,2 3 1
13 0 .0
2 4 ,9 1 4



- 9
+ 2
+ 2
+ 6
+ 4

6 ,8 7 9
6 ,2 0 0
3 ,4 4 4

4 ,3 6 8
5 ,4 2 8
3 ,0 0 9

6 ,6 7 7
3 ,6 9 4

+ 2

+ 3
- 5

1 1 1 .8
7 ,6 3 8 .7 r
2 , 6 9 9 .3r
6 2 ,6 2 4
4 ,8 0 0
15 8 .0

+ 3
- 9
+ 1
+ 1
- 8
- 5
- 8
+ 5
+ 2

+ 6
+ 2
+ 2
+ 5
+ 2
f 5




- 1
L 2
- 2
r l2
- 1
- 3
- 3
- 3

Banking and finance
Total investments of all commercial banks.....................................
Total loans of all commercial banks...................................................
Total demand deposits adjusted..........................................................
Currency outside the Treasury and Federal Reserve Banks*§.
Velocity of demand deposits (337 centers)*...................................
Consumer instalment credit outstandingt........... ...........................

United States Government finance (other than borrowing)
millions of $
millions of $
millions of $

1 2,192
6 ,8 9 8
3 ,5 0 5

1947-49 = 100
1 9 47 -49 = 100
1947-49 = 100
194 7 -4 9 = 100
millions of $
millions of $
1 9 47 -49 = 100
19 47 -49 = 100
1947-49 = 100

11 3 .8
2 ,7 0 5 .7 p
6 5 ,4 9 4
4 ,9 0 1
1 6 6 .0



Electric power output (New York and New Jersey)*.....................
Residential construction contracts*........................................................
Nonresidential construction contracts*.................................................
Consumer prices (New York C it y ) f .......................................................
Nonagricultural employment*...................................................................
Manufacturing em ploym ent*....................................................................
Bank debits (New York C ity )* ................................................................
Bank debits (Second District excluding New York C it y )* ..........
Velocity of demand deposits (New York C ity )* ...............................
Department store sales*...............................................................................
Department store stocks*............................................................................

11 3 .0
7 ,7 0 6 .4 p
2 ,6 8 0 .8
70 ,8 6 9
5 ,1 7 0
18 0 .2

1 1 2 .3
7 ,6 7 8 .2
2 ,6 7 0 .0
6 5 ,7 1 5
5 ,0 7 2
1 7 6 .0

N ote: Latest data available as of noon, August 1, 1956.

p Preliminary.

t Revised series. Back data available from U . S. Bureau of Labor Statistics,

r Revised.

# Change of less than 0.5 per cent.
§ Seasonal factors revised back through 1938.
f Revised series. Back data available from U. S. Department of Commerce.

• Adjusted for seasonal variation.
t Seasonal variations believed to be miner; no adjustment made.

Source: A description of these series and their sources is available from the Domestic Research Division, Federal Reserve Bank of New York, on request.