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MONTHLY AUGUST 1950 CONTENTS The Price of Farm Land in Two Postwar P e r i o d s ................................................... 1 The Scope and Availability of Department Store Trade Data K e v i e National Business Summary w . . . . . 5 8 FIN AN CE • INDUSTRY ®A G R IC U L T U R E • TRADE FO U R TH Vol. 33— No. 8 FED ER A L RESERVE DI STRI CT Federal Reserve Bank of Cleveland Cleveland 1, Ohio The Price of Farm Land in Two Postwar Periods F LUCTUATIONS in the market value of farm real estate during the past five years bear little resemblance to the pattern followed after World War I. For example, by early 1924, farm land prices had fallen about 23 percent from the peak values reached in 1920, whereas in the present instance prices have receded only some three or four percent. An important stabilizing influence perhaps has been the continued strength in the markets for farm prod ucts. Prices of agricultural commodities in the aggregate have tended to fluctuate within a range of 2 /4 to 2/2 times the prewar level throughout the past five years, in contrast to the sharp liquidation U. S. FARM REAL ESTATE; VALUE1 March 1, 1912-1950 (1935-39 = 100) —W . . . the rise in farm land values that accompanied World War II started from a lower level but went higher and continued longer than the World War I rise. Moreover, the decline from the peak thus far has been less abrupt than in the earlier period. of 1920-21, when such prices fell to a point only some 25 percent above prewar. Charts accompanying this article depict the land market situation after the two wars by presenting graphically certain statistics compiled by the U. S. Department of Agriculture. Throughout this dis cussion the expressions “farm real estate” and “farm land” are used interchangeably in reference to farm land with improvements, including buildings. Farm land values reached a peak within two years after the end of World War I and then dropped sharply. After the end of World War II, the upward movement lasted a year longer and went somewhat beyond the record established 29 years earlier. Changes in farm land values reflect changes in prices received by farmers for their products and anticipations as to future income levels. This relation ship helps explain the difference in behavior of land values in the two postwar periods. In the present period the demand for farm products has remained high, resulting in a longer postwar rise in prices. Partly as a result of the acquisition of $4 billion of agricultural products in pursuance of a statutory support program in the past two or three years, the drop in farm product prices from the postwar peak was less precipitous than after World War I. The 1950 recovery of agricultural prices, accelerated by the Korean outbreak, will tend to push farm land values toward the peak of a year or two ago; and if the international crisis is prolonged, farm land values may reach a new all-time high. Returns from Although the relationship between Use of Land farm real estate values and farm product prices appears close, the actual increase in land values as a result of high Monthly Business Review Page 2 U. S. FARM REAL ESTATE: VALUEi COMPARED WITH FARM PRODUCT PRICES3 Post World War II (1935-39 = 100) FARM-PRODUCT PRICES FARM-REAL-ESTATE VALUE :30 100 p r e w a r '3’ ■ \\ 1 PREVWKR13’- Post World War I (Prewar3 — 100) 1 — \ \ farm - p r o o u c t p r ic e s farm - r e a l - e s t a t e value < -------------------- .1 ........ ______ 1 ,. .1 ........... 1-----------1 ■_ 1 1 l P O S T W A R 1 ------------------- ^ 1 ---------1----------- 1------ . . . in both postwar periods farm product prices turned downward about one year before farm land values reached a peak. farm income has been considerably less in the recent war and postwar period than in the earlier one. The higher productivity of farms has raised farm income much more than would be indicated by farm product prices alone. Crop production per acre and produc tion per animal unit are each about one-third greater than in the years immediately following World War I. Because of proportionately larger investment in machinery, equipment, and livestock, and because of higher costs of maintaining real estate, only a part of the increased productivity of farms is attributable to land. Even that part of the net returns from farming which may be allocated to land, however, rose much more in the recent boom period than did real estate values. The annual return to land rose during the last war to 9/ 2 percent of the total value of farm land, compared with a high point of 7^4 percent during World War I. In the 1940’s prospective buyers of farm land tended to be conservative in estimating how long the very favorable returns from August 1, 1950 farm land would continue and, therefore, at what rate such returns should be capitalized. This was in great contrast to the prevailing atti tude during and just after World War I, when it was generally assumed that high farm incomes had come to stay. As it turned out, farm income started dropping in 1920 and dropped much faster than land values, soon bringing the percentage return well below the average mortgage interest rate, which inci dentally, was considerably higher than in recent years. In contrast, the percentage return on farm land, estimated last year at 6.2 percent, was still substantially above the average interest rate on farm mortgages, although declining. Mortgage The increased income during World Debt War II was used by farmers for mort gage debt reduction rather than for ex pansion of acreage as during World War I. Prospective purchasers of entire farms were more cautious, apparently remembering the long period of foreclosures which reached a climax in the early 1930’s. Lenders also were more conservative during World War II and did not make frequent use of second and third mortgages, which were common during World War I. After World War I, farmers’ equities in land de creased sharply as mortgage debt rose and farm land values fell. During that period many farmers in financial difficulties refinanced short-term debts by placing mortgages on their farms and this factor accounted for part of the rapid rise in mortgage debt in the early 1920’s. Although the volume of farm mortgages outstand ing has increased since the end of World War II, owners’ equities in farm realty also continued to increase on the average up until last year because the total value of farm real estate was increasing faster than the total of farm mortgage debt. The reversal in the movement of farm land values during the past year was not accompanied by a reduction in mortgage debt, with the result that for the first time in many years, owners’ equities shrank during 1949. Farmers retired the principal of outstanding obli gations less rapidly during 1949 than in several pre ceding years, but the dollar volume of new mortgage FOOTNOTES FOR ALL CHARTS Source of data for all charts is U. S. Department of Agriculture. * Latest data shown are preliminary. 1 Average value per acre of all farm lands with improvements as of March 1, except as indicated. 3 Based on Prices Received by Farmers (1910-14 = 100). s 1912-14 = 100 for Farm Real Estate Prices and 1910-14 = 100 for Farm Product Prices. * Net land returns (income attributable to real estate) expressed as percent of farm real estate value at end of year. s Years beginning March 16. Monthly Business Review August 1, 1950 U. S. FARM REAL ESTATE: RATIO OF NET RETURNS TO VALUE4, AND MORTGAGE INTEREST RATE Post World War II < ------ *46 | M7 P O S T W A R 1 '52 -------- I __ ____ L—-----J ----------- ---J---- *40 *49 '5 0 * ’ 5l Post World War I . . . from 1943 to 1948 (see top chart) the rate of return on farm land was roughly twice the mortgage-interest rate. This is in contrast to the World War I era (lower chart), when die rate of return was above the interest rate for only two years. recordings dropped only 1 percent from 1948 to 1949. An increase in the number of sales requiring financing has apparently offset part of a recent de cline in the number of farms sold. Nevertheless, farm mortgage debt totals less than one-tenth of the value of all farm real estate. In 1924, six years after the close of World War I, mortgages equaled one-sixth of the value of farm real estate. Short-term farm debt is also consid erably smaller than in the years just after World War I; and it is only about one-fifth as large as the value of livestock, machinery and motor vehicles on farms, compared with about two-fifths in 1924. With less hardship imposed on owners by boomtime overcapitalization of in come, the farm land market as measured by the number of voluntary sales remains stronger than in the corresponding period after World War I. Pag© 3 As before, the number of sales began to drop after the first postwar year, but in contrast, the peak was higher and three years of decline have ended with sales still more numerous than at the beginning of the War. The number of voluntary sales might have risen higher during the war, but for certain restraining influences, one of which was the general caution previously mentioned. Wartime shortages of labor and farm equipment likewise caused some withhold ing of purchases, particularly for farm enlargements. Some sales were deferred by the owners’ problem of what to do with the proceeds. In contrast with the number of voluntary farm sales, forced sales are very small in number. In 1949 there were practically no farm transfers resulting from delinquent taxes, and sales due to mortgage foreclosures and assignments in bankruptcy averaged not more than 1.8 per 1000 farms. Largely because the number of forced sales is so low, the total num ber of farm transfers (including also inheritances, gifts, and administrators’ and executors’ sales) has fallen to the lowest level since complete records first became available in 1926. Early statistics are avail able, however, for foreclosures and assignments, and they show that by the mid-1920’s these forced trans fers had risen to five times the prewar rate and were eight times as numerous as at present. Relatively numerous voluntary sales but few forced sales, along with relatively high land prices, indicate continued strength in the farm real estate market. Latest reports mention a slight increase in interest since last Fall in the purchase of farms, but the demand is more selective than previously. For the poorer farms demand has slackened, but for the better grades of land, particularly in the Corn Belt, it is still strong. U. S. FARM REAL ESTATE: MORTGAGE DEBT OUTSTANDING January 1, 1912-26 and 1939-50 Farm Transfers . . . in sharp contrast to the situation after World War I, farm mortgage debt has risen very moderately in the current period. Monthly Business Review Pago 4 U. S. FARM REAL ESTATE: VOLUNTARY FARM SALES5 . . . since World War II, voluntary farm sales have been relatively more numerous than in the period immediately following World War I. Although the pattern of land-value movernents in the four Fourth District states combined has been similar to the national average, individual states show wide deviations from the over-all trend. In Kentucky, for example, farm land values rose farther above the prewar level than in any other of the 48 states. Last March, values in that state were 182 percent above the prewar level, compared with 104 percent for the nation as a whole and 131 per cent for Ohio. During the war, tobacco growers were favored with exceptionally good returns and subsequent income shrinkage has been less for to bacco farming than for most other kinds of farming. Acreage allotments and marketing quotas have re Fourth District U. S. FARM REAL ESTATE: VALUE1 March 1, July 1, November 1, 1946-50 U. S., Ohio and Pennsylvania (1935-39 = 100) 1935-39-100 1935-38=100 . . . since last November, farm real estate values have risen somewhat in Ohio and Pennsylvania, as well as in the country as a whole, but are still measurably below the peaks reached in the winter of 1948-49. August 1, 195 0 duced the risk of a sharp drop in income and are therefore partially responsible for the maintenance of high land values in Kentucky. Dairy farmers, on the other hand, have experi enced a smaller than average increase in income since the prewar years, and, in consequence, farms in dairy areas have increased in value less than the average for the country. This difference accounts partially for a relatively small increase in farm land values in Pennsylvania. West Virginia, although not predominantly a dairying state, has had about the same percentage increase from the prewar level of farm land values as has Pennsylvania. Swings in values have been a little wider in West Virginia than in Pennsylvania, however, and by last March the index had dropped to 169 compared with Pennsylvania’s 181. Taxes per acre on farm land—though only moderately higher than in the postWorld-War-I years of relatively small returns from the use of land—are the highest on record and ap parently are still rising. Higher operating costs of state and local governments and the need for ex panded public facilities — particularly schools and roads — are resulting in widespread demands for more revenue. This and other aspects of the farm real estate situation appear to justify continued caution on the part of owners, buyers, and lenders. Farm income is lower than in recent years, and farm proprietors’ equities are reduced on the average by slowly grow ing mortgage debt and lower land values—in spite of a small rise last winter. The future trend in farm land prices will depend mainly on developments in the general economy of the nation and these in turn will depend largely upon international political and military developments. Outlook U. S. FARM REAL ESTATE: TAX LEVIES PER ACRE . . . although taxes per acre are only moderately above the level of the post-World War I period, there is no indication yet of a leveling-off such as occurred in the earlier period. Monthly Business Review August 1, 195 0 T The Scope and Availability of Department Store Trade Data Page 5 authority and jurisdiction seldom arise. If anything, HE collection of department store trade data the cooperating stores frequently express a desire for was inaugurated on a national scale by the Federal Reserve System shortly after the close of more detailed information rather than for less re porting responsibility. World War I. The evolution and administration of appropriate monetary and credit policies, under Monthly The wheels of data preparation are put rapidly changing conditions, made it highly desirable Procedure into motion each month when three that the System be as well informed as possible re separate forms are sent out to the de garding the major elements in the economy. partment stores in this District. At that time the compilation of business statistics The first of the forms requests monthly dollar was quite in its infancy and the almost complete sales broken down into cash, charge account and lack of quantitative up-to-date information on retail instalment sales for the current month and the cor trade, industrial production, and innumerable other responding month of a year ago. The second form series now considered indispensable, was an obvious requests dollar sales and stocks for more than one handicap to the System. W'hile it was recognized hundred departments for the current month and that department store trade actually represents only year-ago month. The third request includes blanks a small percentage of total retail trade, a start had for outstanding orders, total stocks, accounts receiv to be made somewhere, and the department store able and collections. field appeared to be the most practical. These forms are sent to the stores at the end of This initial venture into an unexplored statistical each month and are filled out and returned to the field was extremely limited in scope when compared research department by the fifteenth of the follow with present-day standards and requirements. Ar ing month. The incoming reports are checked for rangements for reporting were made with a nucleus discrepancies and are then machine tabulated, and of cooperative stores only upon assurance that the it is from the printed sheets supplied by that oper confidential nature of individual store figures would ation that the tabular material presented in many not be violated. Data on dollar sales and end-ofof the trade section releases is obtained. month inventories were gathered at monthly inter In addition to the monthly forms described above, vals, and were subsequently published in the form a somewhat smaller sample of stores report each of percentage changes from the corresponding month week, on a simple little form, total dollar sales for of the preceding year. It soon became evident, how the most recent week and for the comparable week ever, that year-to-year changes in sales were not as of a year ago. Space is also provided on the form important from the interpretative standpoint as for comments regarding special sales, extreme month-to-month changes. Consequently, the per weather, transit disruptions and other unusual fac centage change technique was supplanted by dollar tors that might have influenced trade in a single sales figures and shortly afterward these in turn were city. These reports are received by the research de superseded by the index numbers method. A series partment by the Wednesday following the week to of adjustment factors were developed which, when which the sales figures pertain. applied to the indexes, helped to remove the monthSince the immediate objective of this somewhat to-month seasonal fluctuations. elaborate statistical operation is that of providing Present With the passage of years, the program the Board of Governors with accurate and timely in Status has gradually broadened, not only because formation on retail trade, the end results of each of the System’s requirements, but also in individual phase are mailed or wired to the Board response to the increasing interest manifested by immediately upon completion. It has become the reporting stores and by the general public, regard established policy of this bank, however, to make ing the current state of trade. At intervals the vari the same information available to the public as ous samples were expanded and steps were taken to promptly as possible through the medium of news obtain information on changes in outstanding orders paper releases. These releases are not limited in cir and trends in collection of receivables. culation exclusively to news purveyors, but are At the present time all of the information supplied obtainable by anyone making a written request to by reporting stores comes in on a voluntary basis. be placed upon one or more of the several mailing While it is true that some aspects of this statistical lists. At the present time there is no charge for this operation are carried out primarily for the benefit accommodation, on the grounds that the dissemina of the Federal Reserve System, the program in its tion of useful facts and figures on current business entirety is of such vital importance to the reporting trends is a legitimate function of a public service firms and to the public at large that questions of institution. Monthly Business Review Page 6 oi C\ eveVa°d ^ ,n * i t -p.eSetVe **-eS ese®10" * e4 et 8«-«' :SV Y rch " * » “ r „ veP a rBa« t of c ,e V e la tld t m erit * June 30 BYDsm^^w^r D eP 311 »= - . 1S5° saiss xrth^ t rictd rnr sea «ere re* * .tores <eT a rW 30 H I as f r Research D epar t me nt lo u rs n a n p .rs * J u n e A .M . Newspapers, 30 D ate above OnWI°°r StWeS ^ de ^ » n t 3 SALES Cash S a les Regular Charge Account S ales Instalm ent Charge q° n ' ****** e acft May 1950 Apr. it -------------- \ R eset ve ?ede f e d era Research DeP 2® —.— ’ 1?50 May es Weak?>ess lr au in g d a y . •h0Wed ^bstantiaa a-t Mgains gains fron frota 19 U9 3 9 . 3% 51 .l» 9 -3 3 7 . 8* 50 .U 1 1 .8 100 . 0 ? O r s i> . * June L I <can \ ***» °^alCI \ Qanto^ \ s s — S CDi’» J>us \ loWdo Itrie .^ \i^Y6veel!to'^^,ro \ ayear Hay-reU%a^ y& avera s* -# 5 S S ~ ° • 5 .v ? £ - " i2*£^ g^ 6jironr«P°£d1* CSf^tfes r3gS increase3 ra i Se a S o n ^ AtYl a tW — ^ ntalned a bout a t SALES, CREDITS AND COLLECTIONS (F ou rth D i s t r i c t Reporting Department S t o r e s ) I or ^ •* * * of * * ** • -intaln d rep op„ °f a ll.. Ae,- saasss^®^ For Re1*®5' ^ y - variati . . . ^ ® v e r’ Federal R eserve Bank of C leveland DEPARTMENT u « .r n « ..n -® " STORETRADE ST0RE for R elease „ ,4 » «®r ' mi9s° 8 °f < * * . ,» 10,.1X00 , n t^ re ^staooV» 08 August 1, 1 9 5 0 3 ;es ive f°£. _ sea30na fle«seTiabie °®e . . . the releases through which current information on department store trade is made available to the general public. vision +focond >»lf a yearsales ag0. J 6 lIay ” APM1, as l3 °v5Tast yearfs3a^S ** Position. fap *e"' /eve/a n . August 1, 1950 Monthly Business Review The final tabulations of department store trade fall into two groups, one of which consists of the releases prepared for the public, and the other represents a more specialized type prepared exclu sively for the reporting stores. The public releases consist of Monthly Sales by Cities, Sales by Depart ments, Inventories by Departments, Weekly Sales by Cities, and Sales, Credits and Collections. “Monthly Sales by Cities” is a single page release which includes a table of index numbers for the three most recent months and for the past calendar year (based on the year 1947) for eleven Fourth District Cities. It also contains percentage changes in dollar sales from the preceding month and from the year-ago month. The bottom half of the page is devoted to textual material and usually includes some interpretation of current developments as well as a description of the data in the table. “Sales by Departments” and “Inventories by De partments” are both two-page monthly releases. The back page of each consists of a table of percentage changes from a year ago for some sixty key depart ments.* These tables are made up directly from machine tabulation sheets. The first page of both releases describes and analyzes changes among the various types of merchandise. This information is made available to the public for the District as a whole. “Sales, Credits and Collections” is a single page monthly release which devotes itself exclusively to the credit phase of department store activities for the Fourth District. In the table on the top half of the page, cash sales, charge account sales, and in stalment sales are presented as proportions of total store sales for the current month, the past month, and for the comparable month of a year ago. Col lections on regular charge accounts and on instal ment accounts are presented as percentages of charge receivables and instalment receivables respectively, for the same time periods. The bottom half of the page contains textual material relating to movements in the foregoing credit activities of Fourth District Department Stores. The most popular release issued by the trade sec tion from the standpoint of number of copies re quested is the single-page weekly release “Sales by Cities.” The release follows the familiar format of top-half table and bottom-half text. The table con tains percentage changes (for seven cities as well as the entire District) from the preceding week, changes from a year ago for each of the four most recent weeks, changes from a year ago for the two most recent four-week periods, and changes from the Distribution of End Results * Tables of year-to-year changes for a group of approximately one hundred departments are also available upon request. Page 7 corresponding week of two years ago. The text has an up-to-the-minute summary of developments in department store trade and is supplemented by a unique index which has been adjusted for weekly seasonal variations. The cooperating stores receive a group of similarly entitled reports on Monthly Sales by Departments, Monthly Stocks by Departments, Department Store Operations and individual store index numbers. However, the reports to the stores on Sales by Departments and Stocks by Departments, although similar to their counterparts among the public re leases, are subdivided on a city-wide basis for seven separate cities. Moreover, quarterly and annual summaries of Sales by Departments are sent to the stores as well as the regular monthly editions. No text accompanies the special store releases. Department Store Operations is the title of a monthly report which includes year-to-year percent age changes in sales, stocks and outstanding orders for eleven cities, and changes in credit sales, accounts receivable and collections for seven cities. Each store also receives its individual store index as soon as the total sales forms for all stores in that city have been submitted. Beside the regular releases to the public and re ports to the stores, the research department also makes available upon request some useful supple mentary information. A booklet entitled “A Hand book of Department Store Statistics” contains many back figures for sales indexes, both unadjusted and adjusted for seasonal variation for the Fourth Dis trict and eleven individual cities, plus adjusted and unadjusted indexes of stocks for the District. It also includes annual indexes dating back to 1939 for fifty departments and contains what is known as the “horizontal spread” for the District and for seven cities. The “horizontal spread” is simply each month’s sales in an individual department ex pressed as a percentage of total annual sales in that department. The total “horizontal spread” covers slightly more than fifty departments. The “horizontal spread” is also available in mime ographed form for the various cities as is the “vertical spread”. The “vertical spread” is made up of the annual sales of each department expressed as a per centage of total store annual sales. Monthly seasonally adjusted indexes of such de partments as women’s and misses’ ready-to-wear apparel, men’s and boys’ wear, furniture, floor coverings and appliances have been used as back ground material for articles appearing in the Monthly Business Review and are also available to the public. Monthly Business Review Page 8 August 1, 1950 SUMMARY OF NATIONAL BUSINESS CONDITIONS By the Board of Governors of the Federal Reserve System (Released for publication July 25, 1 950) Industrial production and construction activity in creased further in June to new peacetime peaks. Following the outbreak of hostilities in Korea near the end of the month, buying showed a marked upsurge and commodity prices generally rose con siderably in both wholesale and retail markets. Common stock prices declined sharply for a time. Prices of U. S. Government securities generally showed little change. Bank credit continued to expand. On July 19 a large-scale Federal program was proposed for expanding defense production and curbing inflationary developments. Industrial Production The Board’s production index rose another 4 points in June to 199. Although output of steel and some other basic materials had been at or close to capacity levels in May, continued strong demands resulted in further increases in production of most major groups of manufacturers and minerals in June. In early July output declined temporarily owing to holiday and vacation influences. Production of durable goods increased substan tially further in June, mainly because of gains in the automobile and machinery industries. Auto mobile assembly, which had been at a new record rate in May, increased 23 per cent further in June, and activity in machinery industries continued the marked rise which began in early spring. Steel pro duction was maintained in June at the capacity level reached in April. Refinery output of nonferrous metals expanded considerably further, but supplies available, after increased takings for Government stockpiles, continued substantially below industry demands. Mine production of copper and iron ore also expanded. Output of nondurable goods increased somewhat further in June, reflecting mainly continued gains in rayon and woolen textiles, paper, petroleum, rubber and chemical products. Tire production was at a new record, and a substantial expansion in output of synthetic rubber was initiated. Activity at cotton mills declined somewhat. Construction Value of construction contracts awarded in June was maintained at the spring peak level reflecting continued expansion in awards for public work which offset further small declines in private awards. The number of housing units started in June was maintained at the record May level and for the first half of the year totaled 687,000 units, as com pared with 449.000 units started during the first half of 1949. Employment Employment in non agricultural establishments rose by about 300 thousand persons in June, after allow ance for seasonal changes. About one-half of this increase occurred in industries producing durable manufactures; there were also gains in employment in construction and transportation activities. Agriculture Total crop production this year, according to July 1 estimates, is expected to be 6 per cent less than last year when stocks increased and exports were somewhat larger. Considerably smaller cotton and wheat crops are in prospect, but feed crops may approach last year’s large harvest. Marketings of meat animals recently have been in about the same seasonally low volume as a year ago, while produc tion of milk and eggs has been larger. Distribution Consumer buying increased considerably begin ning in the latter part of June, influenced largely by international developments. Sales at department stores in mid-July were 24 per cent larger than in the corresponding period a year ago; sales in the preceding 2 weeks were 9 per cent larger. New automobile sales * increased further and the volume was limited only by the supply available. Anticipa tory buying was also evident for various other dur able and semidurable goods and such foodstuffs as coffee and sugar. Distributors’ stocks of most con sumer goods, except passenger cars, had previously been rising following the recovery in production last summer. Commodity Prices Wholesale prices have generally risen consider ably during the past 4 weeks, following earlier marked advances in April and May. The sharpest increases have been in prices of farm and food prod ucts, particularly livestock, meats, imported food stuffs, and cotton. Cotton prices on July 21 were about one-fourth above the Federal loan level. Prices of most industrial materials have advanced further in recent weeks, with especially marked in creases in building materials, textiles, rubber, and tin. Prices of most metals have been maintained at earlier advanced levels. Prices of some additional finished industrial prod ucts have been advanced during this period, and with retail food prices increasing sharply, a substan tial further rise is indicated in the level of con sumers’ prices. Bank C red it Loans to real estate owners and consumers and holdings of corporate and municipal securities showed further substantial increases at banks in leading cities during June and the first half of July. Loans to businesses also expanded. Holdings of U. S. Government securities fluctuated consider ably but declined somewhat over the period. Treasury deposits at the Reserve Banks which had been built up through tax payments in the latter part of June were drawn down during the first three reporting weeks of July, supplying reserve funds to member banks. These funds were absorbed by reduction in Federal Reserve holdings of U. S. Government securities. The System continued to sell Treasury bonds and also sold bills and certifi cates, and these sales were offset in part by pur chases of notes. Security Markets Common stock prices fell 13 per cent from the latter part of June to the middle of July, reflecting developments in Korea, but recovered part of the decline during the third week. Demand for U. S. Government securities broadened throughout this period. W ith virtually no change in prices of long term Treasury bonds, a moderate decline in the prices of high-grade corporate obligations resulted in some widening of the narrow spread between yields of these securities.
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