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Prefatory Note The attached document represents the most complete and accurate version available based on original copies culled from the files of the FOMC Secretariat at the Board of Governors of the Federal Reserve System. This electronic document was created through a comprehensive digitization process which included identifying the bestpreserved paper copies, scanning those copies, 1 and then making the scanned versions text-searchable. 2 Though a stringent quality assurance process was employed, some imperfections may remain. Please note that some material may have been redacted from this document if that material was received on a confidential basis. Redacted material is indicated by occasional gaps in the text or by gray boxes around non-text content. All redacted passages are exempt from disclosure under applicable provisions of the Freedom of Information Act. 1 In some cases, original copies needed to be photocopied before being scanned into electronic format. All scanned images were deskewed (to remove the effects of printer- and scanner-introduced tilting) and lightly cleaned (to remove dark spots caused by staple holes, hole punches, and other blemishes caused after initial printing). 2 A two-step process was used. An advanced optical character recognition computer program (OCR) first created electronic text from the document image. Where the OCR results were inconclusive, staff checked and corrected the text as necessary. Please note that the numbers and text in charts and tables were not reliably recognized by the OCR process and were not checked or corrected by staff. Content last modified 6/05/2009. CONFIDENTIAL (FR) SUPPLEMENT CURRENT ECONOMIC AND FINANCIAL CONDITIONS Prepared for the Federal Open Market Committee April 14, 1972 By the Staff Board of Governors of the Federal Reserve System SUPPLEMENTAL NOTES The Domestic Financial Situation February, March and first quarter 1972 Monetary aggregates. figures for M 1 , M 2 and the adjusted credit proxy have been revised Revised figures are upward somewhat since the Greenbook was prepared. shown in the table below. MONETARY AGGREGATES (Seasonally adjusted changes) 1971 QIII 1972 QIV QI p Jan. Feb. Marp (Annual percentage rates) 1. M1 (Currency plus private demand deposits) 3.7 1.1 9.5 3.2 12.6 12.5 4.4 8.0 13.3 13.4 14.3 11.6 M3 (M2 plus savings deposits at mutual savings banks and S&L's) 7.8 9.6 15.5 15.4 16.7 14.0 4. Adjusted bank credit proxy 7.6 9.7 11.3 9.9 5.9 18.0 5. Time and savings deposits at commercial banks 2. M2 (M1 plus commercial bank time and savings deposits other than large CD's) 3. a. Total 8.2 15.9 14.8 20.0 16.2 7.8 b. Other than large CD's 5.3 14.7 17,1 24.4 15.4 10.8 (Change in $ billions) Memorandum: a. U. S. Government demand deposits 2.3 -. 4 -. 1 b. Negotiable CD's 2.3 1.8 -. c. Nondeposit sources -. 4 -- -. 3 of funds p - Preliminary and partially estimated. .1 1 -2.6 2.3 -. 2 .6 -. 4 -. 1 -. 3 .1 - 2 - Mortgage market. Rates on home mortgages eased a little during March, according to the FHA series, although firmer conditions appeared in the secondary market toward month end. Despite mixed regional trends, the average contract interest rate on conventional new-home mortgages for the nation as a whole declined slightly in the primary market to 7.55 per cent, 40 basis points below last summer's high. points. On existing-home loans, the average rate also dropped by 5 basis Yields on Government-underwritten home mortgages in the private secondary market moved down by only 1 basis point to 7.45 per cent-52 basis points below the peak in July 1971. Relative to the further rise in yields on new issues of high-grade corporate bonds during March, rates on home mortgages became even less attractive to diversified lenders than they were in February. -3- AVERAGE RATES AND YIELDS ON NEW-HOME MORTGAGES Primary market: Conventional loans Yield spread Level (basis points) (per cent) 1971 - Low High Oct. Nov. Dec. 1972 - Jan. Feb. Mar. NOTE: Secondary market: FHA-insured loans Yield spread Discount Level (basis (points) points) (per cent) 7.55 7.95 -36 71 7.32 7.97 -36 56e 2.5e 7.8 7.80 7.75 7.70 51 56 61 7.75 7.62 7.59 46 43 50 6.1 5.1 4.8 7.60 7.60 7.55 53 44 33 7.49 7.46 7.45 42 30 23 4.0 3.8 3.7 mortgages FHA series: interest rates on conventional first (excluding additional initial fees and charges) are rounded to On FHA loans carrying the 7 per cent the nearest 5 basis points. rate in effect since mid-February 1971, a change of 1.0 ceiling points in discount is associated with a change of 12 to 14 basis Gross yield spread is average mortgage return, points in yield. before deducting servicing costs, minus average yield on new issues of high-grade corporate bonds with 5-year call protection. CORRECTIONS: Page 1-27 should follow page 1-28. Page 11-2, line 1 of Outlook should read "Increased anticipations of a firming trend in......." -4INTEREST RATES 1972 Highs Lows Mar. 20 Apr. 13 Short-Term Rates Federal funds (wkly. avg.) 4.18 (4/12) 3.18 (3/1) 3.88 (3/15) 4.18 (4/12) 3.94 (3/15) 4.62 (4/13) 4.50 (4/13) 3.87 4.25 5.69 (1/14) 2.99 3.75 3.38 4.62 3.86 4.62 4.50 5.31 4.50 (4/12) 4.70 (4/12) 3.50 (2/23) 3.50 (2/16) 4.12 (3/15) 4.44 (4/4) 4.62 (4/13) 4.74 (4/10) 3.35 (1/10) 3.88 (3/3) 4.30 4.75 (4/12) 5.00 (4/12) 3.88 (2/23) 3.70 (2/2) 4.38 (3/15) 4.50 (3/15) 4.15 5.00 (4/12) 4.86 (4/4) 3.57 (1/8) 4.32 (1/17) 4.56 4.93 4.80 5.23 5.12 (4/12) 3.15 (4/13) 4.62 (1/19) 4.88 (3/15) 2.35 (1/12) 2.80 5.12 3.15 Treasury coupon issues 5-years 20-years 6.28 (4/13) 6.19 (4/13) 5.47 (1/13) 5.95 (1/14) 5.97 6.08 6.28 6.19 Corporate Seasoned Aaa Baa 7.30 (2/14) 8.29 (1/3) 7.14 (1/17) 8.17 (1/19) 7.23 8.24 7.29 8.22 7.42 (4/14) 6.86 (1/14) 7.14 (3/17) 7.42 5.54 (4/13) 5.25 (4/13) 4.99 (1/13) 4.65 (1/13) 5.32 (3/17) 5.00 5.54 5.25 7.61 (2/22) 7.54 (3/20) 7.54 7.56 (4/3) 3-month Treasury bills (bid) Comm. paper (90-119 day) Banks' acceptances Euro-dollars CD's (prime NYC) Most often quoted new Secondary market 6-month Treasury bills (bid) Comm. paper (4-6 mo.) Federal agencies CD's (prime NYC) Most often quoted new Secondary market 1-year Treasury bills (bid) Federal agencies CD's (prime NYC) Most often quoted new Prime municipals 5.25 (4/11) (2/11) (2/29) (2/23) (3/8) 3.79 (2/17) 4.12 5.44 3.98 (3/15) 4.38 4.61 4.50 4.70 (4/12) 4.34 4.62 4.72 Intermediate and Long-Term New Issue Aaa Municipal Bond Buyer Index Moody's Aaa Mortgage-implicit yield in FNMA auction 1/ 1/ Yield on short-term forward commitment after allowance for commitment fee and required purchase and holding of FNMAstock. Assumes discount on 30-year loan amortized over 15 years.
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