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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 this document may contain occasional gaps in the text. These gaps are the result of a redaction process that removed information obtained on a confidential basis. 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 optimal 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. August 20, Strictly Confidential (FR) 1982 Class I FOMC MONETARY POLICY ALTERNATIVES Prepared for the Federal Open Market Committee By the staff Board of Governors of the Federal Reserve System STRICTLY CONFIDENTIAL (FR) CLASS I - FOMC August 20, 1982 MONETARY POLICY ALTERNATIVES Recent developments (1) M1 was about unchanged in July. While data thus far available for the first half of August suggest a strengthening, the aggregate has been running below the Committee's 5 percent annual rate growth objective for the June to September period. Relative to the expectations built into the intermeeting path for M1, the shortfall in growth has been in currency and demand deposits. NOW accounts through the first half of August have increased on balance by somewhat more than expected, with most of the growth taking place in late July and the first half of August. (2) M2 growth in July--at 9.4 percent--was consistent with the targeted path for the June-to-September period as stronger growth in its nontransaction component offset the weakness in M1. In the first half of August, however, M2 strengthened and moved above the Committee's nearterm objective, reflecting the pickup in M1 growth and a further acceleration in the nontransaction component of M2. Money funds and small time deposits have been the primary sources of strength in M2 in July and early August. Savings deposits, in contrast, have declined sharply, after growing moderately over the first half of the year. The strengthening of M2, and the recent pick-up of M1 paced by NOW accounts, raises the possibility that somewhat more of the tax cut is being saved than earlier anticipated, or at least saved in more liquid forms. KEY MONETARY POLICY AGGREGATES (Seasonally adjusted, annual rates of growth) 1982 June July June to 1st Half August 1/ M1 -0.3 -0.5 3.6 6.9 5.0 M2 6.6 9.4 n.a. 9.7 9.6 8.7 12.5 n.a. 10.6 11.0 M3 8.9 12.5 n.a. 9.8 10.3 Bank credit 5.1 6.4 n.a. 8.3 4/ 7.84 -1.4 13.1 20.6 2.6 4.1 Total reserves 3.3 -0.5 7.4 5.2 4.3 Monetary base 7.9 3.0 5.8 7.7 7.2 1981 Q4 to 1982: 1982: Q2 July Money and Credit Aggregates (Nontransaction component) 2/ Reserve Measures - Nonborrowed reserves Memo: / (Millions of dollars) 1st Half August - Adjustment borrowing Excess reserves 1101, 641 333 308 312 337 n.a. - Not available. j/ First two full statement weeks of August. Growth rates of reserve measures are adjusted to remove the effects of discon2/ tinuities resulting from phased changes in reserve ratios under the Monetary Control Act. 2/ Nonborrowed reserves include special borrowing and other extended credit from the Federal Reserve. 4/ Measured from December-January average base. (3) M3 growth has accelerated markedly since the last Committee meeting, reflecting more rapid expansion in both large CDs and institutional money funds. Large CD issuance has been boosted in response to cost advan- tages in the domestic market versus the Eurodollar market and, reportedly, by a desire of some banks to build liquidity in an uncertain environment by issuing longer-term CDs. The recent surge in institutional money fund inflows has been prompted by attractive returns in comparison to faster declining market rates. (4) Bank credit grew at about a 6-1/2 percent annual rate in July, somewhat faster than in June but still below the pace of the first half as a whole. Business loan growth tapered off in July and large bank figures suggest a further weakening in early August. Other forms of short-term borrowing offset the weakness in business loans in July, as loans booked at foreign branches of U.S. banks and commercial paper issuance by nonfinancial corporations accelerated, but data for early August suggest a slowing in these forms of short-term borrowing as well. Corporate bond issuance in domestic markets strengthened moderately in July and,impelled by the recent rally in debt markets, appears to be strengthening further. (5) After showing virtually no growth in June, nonborrowed reserves expanded at about a 20 percent annual rate through the first half of August. A relatively substantial growth was implicit in the higher targeted growth rate for money decided at the last Committee meeting and the initial borrowing assumption of $800 million that was lower than the actual June level. Nonborrowed reserves grew even more than the initial path implied mainly because of adjustments to accommodate greater than anticipated expansion of large time deposits as well as adjustments in response to the considerable shortfall of M1 from the short-run money target. 1/ Meanwhile, with actual borrowing at the discount window (other than extended credit) declining to about $335 million in the first two full statement weeks of August, total reserve growth from June through the first half of August was at about a 7-1/2 percent annual rate. (6) With bank reserve positions easing and the discount rate reduced in three steps to 10-1/2 percent, the federal funds rate fell from the 14-3/4 percent area in early July to around 10 percent on average in the last full statement week; however, trading in very recent days has been around 9 percent, perhaps in sympathetic reaction to the general market ebullience. Since the July Committee meeting, other short-term market rates have declined 4-1/2 to 6-1/2 percentage points. Even as rates have declined, there has been a marked widening of quality spreads on commercial paper and a more pronounced tiering in the CD and RP markets, in the aftermath of the Penn Square failure, the recent bank- ruptcy of Lombard-Wall, and rumors about bank problems with Mexican loans. (7) Bond rates declined about 1-3/4 percentage points on balance over the intermeeting period. A substantial part of these declines occurred in the unusually sharp bond market rally on August 17, when record price increases were also established in the stock market, spurred in good part by a greatly revised forecast of interest trends by prominent market analysts. Interest rates on new conventional mortgages have as usual lagged the decline in market rates, 1/ falling about 50 basis points since Reserve paths and intermeeting adjustments are shown in Appendix I. the July meeting. With the federal deficit expanding, the Treasury has stepped up its borrowing in the note sector, as well as in the bill market; statutory authority to issue new bonds is included in the new tax legislation just passed. Tax-exempt offerings have continued at about the same rapid pace seen over the first half of the year. (8) The weighted average value of the dollar fell in July, rose again to a new peak in mid-August, and is now just below the high level recorded at the last FOMC meeting. The net decline in U.S. short- term interest rates over the intermeeting period greatly exceeded the moderate rate declines in major foreign countries. Thus, the continued strength of the dollar seems to reflect investors' preference for dollars at a time of widespread political and financial strains. Alternative near-term targets (9) The upper panel of the following table presents alternative targets for M1 and M2 for the third quarter. The middle panel indicates the implied two-month July-to-September growth rates for each alternative, and the last row suggests possible associated intermeeting ranges for the federal funds rate. More detailed data for the alternatives are shown in the table and charts on the next few pages, and the quarterly interest rate path underlying the staff's GNP projection is contained in Appendix II. Alternative A Alternative B Growth from June to September 5 10 M1 M2 4 9-1/2 Implied growth from July to September M1 7-3/4 6-1/4 M2 10-1/4 9-1/2 7 to 12 8 to 13 Federal funds rate range (10) Alternative A represents the Committee's current thirdquarter M1 target of 5 percent, but with an upward revision of the M2 target from 9 to 10 percent in reflection of the strength of this aggregate currently. To attain the 5 percent target, M1 would have to accelerate to a 7-3/4 percent annual rate of growth on average in August and September. This is likely to be consistent with short-term rates over the intermeeting period at around recent levels, or perhaps a little higher--with the funds rate in the 9 to 9 1/2 percent area. Such growth in M1 would imply a rise on a quarterly average basis of only about 2 percent at an annual rate, Chart 1 CONFIDENTIAL (FR) Class FOMC ssII - F Actual and Targeted M1 Billions of dollars 480 M1 -ACTUAL *. LEVEL SHORT-RUN ALTERNATIVES - 470 - 460 1 5% % 4% 22 % 450 2%% 440 430 420 SI O N 1981 I D J I I F M A I M I I J J 1982 I A I S O N I N 410 D Chart 2 CONFIDENTIAL (FR) Class IIFOMC Actual and Targeted M2 and M3 M2 Billions of dollars 12000 - ACTUAL LEVEL *** SHORT-RUN ALTERNATIVES -- 1950 1900 -woo 00 0-11 5-v 00 .0e -41850 001 -- 1800 I , O I N 1981 I D I J I F I I M A I M I I J I J A I S I I O N 1982 M3 - 1750 D Billions of dollars 12400 ,9/2,% ACTUAL LEVEL S** SHORT-RUN ALTERNATIVES 2350 61/2% -- 2300 rnI -- 2250 / '/ .0 -- 2200 III v- I I I O N 1981 - D 2150 3 J F M A M J J 1982 A S N D 100 Alternative Levels and Growth Rates for Key Monetary Aggregates M1 1982--April May June July August September M3 Alt. A Alt. B Alt.A Alt. A Alt. B ALt. B Alt. A Alt. B 452.4 451.5 451.4 451.2 454.0 457.0 452.4 451.5 451.4 451.2 453.9 455.9 1880.7 1897.5 1907.9 1922.9 1944.0 1955.6 1880.7 1897.5 1907.9 1922.9 1943.7 1953.3 2258.1 2278.9 2295.8 2319.8 2353.0 2367.9 2258.1 2278.9 2295.8 2319.8 2352.5 2364.8 11.0 -2.4 -0.3 -0.5 7.2 5.3 10.0 10.7 6.6 9.4 13.2 7.2 10.0 10.7 6.6 9.4 13.0 5.9 12.0 11.1 8.9 12.5 17.2 7.6 12.0 11.1 8.9 12.5 16.9 6.3 4.0 6.3 10.0 10.2 9.5 9.5 12.6 12.4 12.0 11.6 10.4 3.3 1.7 9.8 9.5 9.6 9.8 9.5 9.4 8.7 10.7 12.2 8.7 10.7 12.0 9.8 9.7 10.9 10.7 Growth Rates Monthly 1982--April May June July August September 11.0 -2.4 -0.3 -0.5 7.4 7.9 June-September July-September Growth Rates Quarterly Average 1982--Q1 QI Q3 10.4 3.3 2.0 Memo: Growth Q4 1981 to September 1982 5.6 5.3 -10- as compared with the 7-1/2 percent annual rate of expansion in nominal GNP projected for this quarter by the staff. (11) Total reserves under alternative A would expand at about a 4-3/4 percent annual rate over the balance of the quarter. This probably would be associated with somewhat more rapid growth in nonborrowed than in total reserves, assuming borrowing drops to around $250 million, a nearly frictional level after taking account of seasonal borrowing. For this level of borrowing to be consistent with no more than a modest back-up in short-term rates may, however, require a drop in the discount rate from the current 10-1/2 percent level. (12) Persistence of short-term interest rates at around recent lower levels would tend to be associated with growth in M2 and M3 at a relatively rapid pace, largely in consequence of an exceptionally strong A considerable slowing in growth rates is likely in August advance. September as returns on money market fund shares move closer to alignment with market rates, and perhaps as investors shift into stocks and bonds. On September 1, the new 7-to-31 day consumer time deposit will become available, but this is not expected to have a very significant effect on the overall demand for M2. (13) Under this alternative corporate bond rates might remain around 14 percent or fall somewhat lower, depending in part on how large a surge in corporate bond issuance develops. Most of the proceeds from expansion in bond issues would be used to pay down bank loans and to redeem commercial paper. The weakening of business loan demand and sustained -11- relatively low market rates would likely cause banks to cut the prime rate to less than 13 percent over the next few weeks. The mortgage markets would benefit from the decline in interest rates generally proved prospects for thrift institution profitability. and from im- Mortgage rates are unlikely to fall below the 15 percent level, however, so that the boost to housing would be modest. Short-term U.S. interest rates at around recent levels would give foreign authorities greater scope to ease their interest rates further, which would probably forestall any appreciable weakening of the dollar on exchange markets over the near-term. (14) Alternative B, which calls for 4 percent growth in M1 over the third quarter, likely would be consistent with a federal funds rate in the vicinity of the current 10-1/2 percent discount rate. M1would be expected to grow at about a 6-1/4 percent annual rate on average in August and September, with total reserves expanding at a 3-3/4 percent annual rate over the balance of the quarter. Borrowing at the discount window may be in the $350 to $400 million area. (15) The firming of the funds rate from very recent levels contemplated in this alternative would seem to run counter to the expectations of a good many market participants. As a result, it is quite likely that short-term rates would back up, with the 3-month bill rate moving back toward 9 percent. Bond yields would retrace some of their recent declines, though any reaction in credit markets could be mild in the context of M1 remaining below the 5-1/2 percent upper bound of the -12Committee's 1982 target range (which is assumed in the path) and if incoming economic data continue weak. Because money market fund yields would more quickly come into alignment with market rates, M2 and especially M3 growth would probably be a bit slower than under alternative A. The very recent downward pressures on the dollar in exchange markets probably would abate, and may be reversed. (16) Given the staff's GNP projection, the outstanding debt of domestic nonfinancial sectors is projected to expand at about an 8-1/2 percent annual rate over the third quarter, the same pace as in the first half of the year, but down from the 9-1/2 to 9-3/4 percent increases of 1980 and 1981. Total funds raised would amount to about 12-1/2 percent of the projected third quarter GNP, up from 12 percent on average in the first half. This rise reflects a sharp increase from 3-1/2 to 5-1/4 percent in the ratio of federal government borrowing to GNP, while private credit demands abate. The strength of federal government borrowing, reflecting in part a marked shift toward greater fiscal stimulus as evidenced by a larger high employment deficit, is working to hold up income and interest rates. (17) In the fourth quarter of the year, interest rates may be under upward pressure as compared with levels anticipated between now and September in either alternative A or B. Nominal GNP growth is expected to be maintained at close to the third-quarter rate in part because of lagged effects of the recent tax cut. And in the degree that the quantity of money demanded is also increased from the lagged effects of recent shortterm rate declines there will be a greater likelihood that a rebound in short-term rates would result from efforts to constrain money growth to -13- the upper end of the longer-run M1 range, with the odds on a rebound greater under alternative A than alternative B. To the extent that the Committee is willing to tolerate growth for the year above the 5-1/2 percent limit--say, at around 6 percent--the chances of a rate rebound would be diminished. The table below shows fourth quarter M1 growth rates for alternative 1982 M1 outcomes, given the two current short-term policy alternatives. In any event growth in M2 and M3 for the year seems likely to be fractionally above the Committee's ranges. Growth Rate Over September-December to Attain M1 Growth for 1982 at 5% 5-1/2% 6% Alternative A 3 5 7 Alternative B 4 6 8 -14- Directive language Given below is directive. a suggested operational paragraph for the The specifications adopted at the meeting on June 30 - July 1 are shown in strike-through form. Deletion of the second qualifying sentence no longer seems relevant. is proposed since it However, the first qualifying sentence still appears to be germane, particularly in light of the current strength of M2. OPERATIONAL PARAGRAPH In the short run, the Committee seeks behavior of reserve aggregates consistent with growth of M1 and M2 from June to September at annual rates of about [DEL:5] ____ percent and about 9 ____ percent respectively. Somewhat more rapid growth would be acceptable depending on evidence that economic and financial uncertainties are leading to exceptional liquidity demands and changes in [DEL: It was also noted that seasonal social financial asset holdings. increased with together uncertainties, cash on cut tax the of security payments and the initial impact balances, might lead toatemporary bulge inthe aggregates, monetary particularly-M1.] The Chairman may call for Committee consultation if it appears to the Manager for Domestic Operations that pursuit of the monetary objectives and related reserve paths during the period before the next meeting is likely to be associated with a federal funds rate 10 15]____ to persistently outside a range of [DEL: TO____ percent. -15Appendix I RESERVE TARGETS AND RELATED MEASURES INTERMEETING PERIOD (Millions of dollars; not seasonally adjusted) Projection of Reserves Demanded (average for sub-period) period) I I I I I (1) I Actual 4-veek Average I 39,978 I 40,078 I I 40,114/ 40,085.5 / I 39,964 I I 39,324 I I 39,678 39,620 39,678 39,646 39,964 August 6 13 20 1 1 40,411 6 / I 39,711 I 1 40,203 I 40,411 1 39,711 I 40,156 I 40,391'B 1 39,752 8/9/ 40,139 I 40,34310/1 39,704107 I 40,112 l l I July 7 to July 28 I 39,178 1 39,978 39,278 / I 39,994 4 39,399/ /1 40,017 I1 40,002 39,37 1 39,648 4-Week Sub-Period: July 30 I For Remaining I Statement Weeks borrowed I Total I Required I Excess I for of Intermeeting Reserves Reserves Reserves I Reserves I Sub-Period I Periodi/ I (2) I (3) (4) 1 (5) I (6) I (7) 4-Week Sub-Period: 2 9 16 23 I Average Total I Reserves S July Implied Adjustment Borrowin I SNonDate Reserves Path Constructed i I I Reserve Targets for Intermeeting Sub-Period (average for sub- I I I 312 I 639 I 39,878 39,848 39,818 I 39,800 I I I 800 716 618 632 800 626 500 493 - August 4 to August 25 I I 1 I 300 374 339 356 I 325 308 321 I 312 I I I I I 492 I 445 387 I 408 I 492 373 292 307 Represents borrowing in remaining statement weeks (as intermeeting sub-period progresses) implied by each weekly updating of the sub-period average nonborrowed reserves path. The movement in implied borrowing represents deviations in total reserves from target as well as any compensation for misses in nonborroved reserves from target in earlier weeks of the intermeeting sub-period. 2/ Total and nonborroved reserves paths adjusted upward by $100 million due to changes affecting the reserves multiplier. 3/ Total and nonborrowed reserves paths adjusted upward by $36 million due to changes affecting the reserves multiplier. 4/ Nonborrowed reserves path adjusted upward by $85 million after taking account of the general trend in the aggregates and existing market conditions. 5/ Total and nonborrowed reserves paths adjusted downward by $29 million due to changes affecting the reserves multiplier. 6/ Total and nonborrowed reserves paths adjusted upward by $223 million due to changes affecting the Ml reserves multiplier. Preliminary upward adjustments of $24 million, on net, had been taken earlier. 7/ Nonborrowed reserves path adjusted upward by an additional $100 million due to the weakness in total reserves. 8/ Total and nonborrowed reserves paths adjusted downward by $20 million due to changes affecting the HI reserves multiplier. Nonborrowed reserves path adjusted upward by $61 million to reflect thd reclassification of adjust9 ment borrowing of one bank to extended credit during the week of August 11. 10/ Total and nonborrowed reserves paths adjusted downward by $48 million due to changes affecting the N1 reserves multiplier. I/ -16Appendix II INTEREST RATES UNDERLYING THE GREENBOOK GNP FORECAST (Quarterly averages, in percent) FixedRate Mortgage Commitments Federal Funds 3-month Treasury Bills Recently Offered Corporate Bonds (act.) 14.23 12.81 15.68 17.39 Q2 (act.) 14.51 12.42 15.50 16.76 Q3 11 10 15-1/8 16-1/2 Q4 10-1/2 9-1/2 14-1/2 16 11-1/2 10-1/4 14-1/2 15-3/4 Q2 12 10-1/2 14-3/4 15-3/4 Q3 12-1/2 11 15 16 Q4 13 11-1/2 15 16 1982--Q1 1983--Q1 Table 1 Selected Interest Rates August 23, 1982 Percent Period federal funds 1 Short-Term CDs Treasury bills secondary aucn secondary market ucn market 6-m-month month 1-year _3-month 2 3 4 5 comm. paper 1-month 6 money market mutual fund 7 U.S government constant maturity yields bank prime loan 3-year 10-year 8 9 10 30-year 11 Long-Term municorporate Asa utility cipal recently Bond Buyer offered 12 13 home mortages secondary market primary FNMA GNMA security auction con. 14 15 16 1981--High Low 20.06 12.04 16.72 10.20 15.05 10.64 15.85 10.70 18.70 11.51 18.33 11.39 17 32 11.84 20 64 15.75 16.54 12.55 15.65 12.27 15.03 11.81 17.72 13.98 13.30 9.49 18.63 14.80 19.23 14.84 17.46 13.18 1982--High Low 15.61 10.11 14.41 8.68 13.51 10.32 14.36 9.82 15.84 10.51 15.56 9.65 13 89 11.38 16.86 14.71 15.01 12.59 14.81 13.01 14.63 12.73 16.34 14.10 13.44 10.82 17.66 16.44 18.04 15.78 16.56 14.70 1981--July Aug. Sept. 19.04 17.82 15.87 14.95 15.51 14.70 13.91 14.70 14.53 14.40 15.55 15.06 17.76 17.96 16.84 17.70 17 58 15.95 17.04 17.17 16.55 20.39 20.50 20.08 15.15 16 00 16.22 14.28 14.94 15.32 13.59 14.17 14.67 15.73 16.82 17.33 11.14 12.26 12.92 16.83 17.29 18.16 16.65 17.63 18.99 15.76 16.67 17.06 15.08 13.31 12.37 13.54 10.86 10.85 13.62 11.20 11.57 14.01 11.53 11.47 15.39 12.48 12.49 14.80 12.35 12.16 15.32 14.33 12.09 18.45 16.84 15.75 15.50 13.11 13.66 15.15 13.39 13.72 14.68 13.35 13.45 17.24 15.49 15.18 12.83 11.89 12.90 18.45 17.83 16.92 18.13 16.64 16.92 16.61 15.10 15.51 Mar. 13.22 14.78 14.68 12.28 13.48 12 68 12.77 13.11 12.47 12.93 13.71 12.62 13.51 15.00 14.21 12.90 14.62 13.99 12.01 13.11 13.49 15.75 16.56 16.50 14 64 14.73 14.13 14.59 14.43 13.86 14.22 14.22 13.53 15.88 15.97 15.19 13.28 12.97 12.82 17.40 17.60 17.16 17.80 18.00 17.29 16.19 16.21 15.54 Apr. May June 14.94 14.45 14.15 12.70 12.09 12.47 12.50 11.98 12.57 12.86 12.22 12.31 14.44 13.80 14.46 14.38 13.79 13.95 13.74 13.49 13.07 16.50 16.50 16.50 14.18 13.77 14.48 13.87 13.62 14.30 13.37 13.24 13.92 15.44 15.24 15.82 12.59 11.95 12.45 16.89 16.68 16.70 16.27 17.22 July 12.59 11.35 11.90 12.24 13.44 12.62 12.94p 16.26 14.00 13.95 13.55 14.61 12.28 16.82 - 15.56 13.43 13.60 14.24 14.17 14.81 11.79 12.13 12.20 12.70 13.01 11.86 12.17 12.39 12.94 12.98 11.59 12.12 12.50 13.03 13.42 13.52 13.81 14.10 15.00 15.25 13.25 13.42 13.75 14.29 14.61 12.94 13.02 13.05 13.01 13.17 16.50 16.50 16.50 16.50 16.50 13.86 14.03 14.29 14.89 14.91 13.81 13.96 14.13 14.63 14.65 13.50 13.70 13.80 14.18 14.13 15.39 15.59 16.11 16.19 16.03 12.13 12.40 12.63 12 62 12.58 16.65 16.70 16.71 16.73 16.87 -- 15.57 15.58 15.85 Oct. Nov. Dec. 1982--Jan. Feb. 1982--June 2 9 16 23 30 July Aug. - 15.40 15.30 15.84 17.22 16.14 - 16.05 15.95 15.51 15.30 15.46 7 14 21 28 14.47 13.18 12.14 11.02 12.59 11.88 11.06 10.51 12.78 12.20 11 57 11.39 12.98 11.97 11.44 11.38 15.13 14.13 13.34 12.08 14.57 13.54 12.27 11.04 13.14 13.28 13.02 12.22 16 50 16.50 16.36 16.00 14.74 14.17 13.75 13.65 14.47 14.04 13.69 13.76 13.96 13.60 13.36 13.40 15.80 15.70 15.26 15.47 12.47 12.36 12.01 11.97 16.93 16.88 16.75 16.65 - 4 11 18 25 11.15 10.90 10.11 9.92 9.99 8.68 11.18 11.25 10.32 10.67 10.94 9.82 11.63 11.65 10.51 10.73 10.77 9.65 11.89 11.52 11.38 15.29 15.00 14.71 13.36 13 36 12 59 13.62 13 73 13.01 13.33 13.31 12.73 15.16 15.11 14.10p 11 87 11 86 10.82 16 55 16.44 n.a. - 15.12 - 15.17 10.38 9.10 8.65p 9.25 7.52 7.08 10.70 9.39 9.18 11.20 9.55 9.59 10.29 8.56 8.13 15.00 14.00 14.00 12.95 11.91 11.60p 13.20 12.47 12.22p 12.98 12.31 12.11p Daily--Aug. 13 19 20 - 15.78 14.70 I NOTE Weekly data for columns 1,2,3, and 5 through 11 are statement week averages Weekly data In col umn 4 are average rates set in the auction of 6-month bills that will be issued on the Thursday following the end of the statement week Data In column 7 are taken from Donoghues Money Fund Report Columns 12 and 13 are 1-day quotes for Friday and Thursday, respectively, following the end of the statement week Column 14 Is an average of contract Interest rates on commitments for conventional first mortgages with 80 percent loan to-value ratios made by a sample of insured savings and loan associations on the Friday following the end of the statement week The FNMA auction yield Is the average yield In a bl-weekly auction for short-term forward commitments for government underwritten mortgages; figures exclude graduated payment mortgages GNMA yields are average net yields to investors on mortgage-backed securities for Immediate delivery, assuming prepayment in 12 years on pools of 30-year FHAIVA mortgages carrying the coupon rate 50 basis points below the current FHAVA ceiling Table 2 Net Changes In System Holdings of Securities1 Millions of dollars, not seasonally adjusted 1 Change from end-of-period to end-of-period. 2 Outright transactions in market and with foreign accounts, and redemptions (-) in bill auctions. 3 Outright transactions in market and with foreign accounts, and short-term notes acquired in exchange for maturing bills. Excludes redemptions, maturity shifts, rollovers of maturing coupon issues, and direct Treasury borrowing from the System. 4 Outright transactions in market and with foreign accounts only. Excludes redemptions and maturity shifts August 23, 1982 5 In addition to the net purchases of securities, also reflects changes in System holdings of bankers' acceptances, direct Treasury borrowing from the System and redemptions (-) of agency and Treasury coupon issues. 6 Includes changes in RPs (+), matched sale-purchase transactions (-), and matched purchase-sale transactions (+). STRICTLY CONFIDENTIAL (FR) CLASS II-FOMC Table 3 Security Dealer Positions and Bank Positions Millions of dollars Period U.S. government securities dealer positions cash futures and forwards bills coupons bills coupons 1981--High Low 15,668 540 4,633 540 -12,865 -4,535 -4,676 -2,514 1982--High 9,335 1,931 7,935 1,763 -11,077 1,806** -4,740 -2,398 2,950 4,324 5,611 3,314 2,242 1,614 -8,340 -10,071 -9,830 Oct. Nov. Dec. 4,781 5,037 2,185 1,629 3,821 2,289 1982--Jan. Feb. Mar. 3,704 4,557 6,588 Apr. May June Underwriting syndicate positions corporate municipal bonds August 23, 1982 reserves adjustment adjustment bonds Member bank reserve positions borrowin at FRB ** seasonal etended seasonal includes special) total 562 -21 2,597 145 309 30 464 * 2,912 317 186 0 672 0 1,547 258 268 53 324 33 1,908 559 -3,012 -2,972 -2,856 5 10 2 340 292 414 1,429 1,105 933 247 235 222 301 1,679 1,420 1,456 -8,575 -7,120 -5,416 -3,655 -4,307 -4,150 29 195 21 278 344 319 591 403 433 152 95 54 438 165 148 1,181 663 636 5,043 5,327 5,656 -6,344 -7,594 -6,696 -3,272 -3,173 -2,910 0 8 106 418 304 361 1,245 1,426 1,073 75 131 175 197 232 308 1,518 1,790 1,556 7,721 7,390 7,284 4,846 6,713 3,791 -5,552 -10,129 -6,194 -3,402 -4,350 -2,677r 23 84 20 273 359 308 1,156 706 859 167 235 241 245 176 104 1,568 1,117 1,205 July 7,163 ** 1,999** -1,447 ** -3,417 ** 17 316p June 2 9 16 23 30 7,647 8,653 9,335 5,813 4,661 6,777 5,007 3,862 3,343 1,987 -9,391 -6,480 -6,173 -5,512 -5,676 -3,616 -2,987 -2,658 -2,398 -2,467 38 O 42 0 0 672 149 232 220 528 July 7 14 21 28 4,183 8,675 8,085 7,564** 2,906 1,950 1,763 2,136** -5,743 -4,057 -928 1,806** -2,785 -3,262 -3,646 -3,815** 0 0 54 40 501 184 267 Aug. 4,595** 4,668** 2,578** 4,229** 4,086** 4,269** 4,629** 6,025** -3,661** -3,735** -4,280** 25 29 32 Low 1981--July Aug. Sept. 4 11 18 24 2,618** j ______________________ NOTE: Government securities dealer cash positions consist of securities already delivered, commitments to buy (sell) securities on an outright basis for immediate delivery (5 business days or less), and certain "when-issued" securities for delayed delivery (more than 5 business days). Futures and forward positions include all other commitments involving delayed delivery; futures contracts are arranged on organized exchanges. Underwriting syndicate positions consists of issues in syndicate, excluding trading positions. 42 221p 656 972 604 665 260 0p 217 221 1,255 253 268 732 251 258 231 239 188p 311p 322 336p 274p 494p 393p 172p 281p 229p 6 1 6p 133p 131p 3 80 50p 132 115 104 96 93 87 70 33 94p 20p 64p 123p 692p 1,048 1,304 929 1,014 1,616 1,070 559 594 548p 680p 369p 483p ________________________________________________________________ Weekly data are daily averages for statement weeks, except for corporate and municipal issues in syndicate, which are Friday figures. Monthly averages for excess reserves and borrowing are weighted averages of statement week figures. Monthly data for dealer futures and forwards are end-of-month figures for 1980. **Strictly confidential
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