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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 By the Staff Board of Governors of the Federal Reserve System February 2, 1968 SUPPLEMENTAL NOTES The Domestic Economy Manufacturers' inventories rose $460 million in December, according to preliminary estimates. This was about the same as the October-November average increase, bringing accumulations over the fourth quarter to $1.37 billion, or an annual rate of $5.5 billion. Inventories of durable goods manufacturers were up $235 million in December, considerably less than in October or November, and $1.17 billion in the fourth quarter. Stocks of nondurable goods manu- facturers rose by $220 million in December, and the quarterly total showed about the same increase since such stocks had declined in October and changed little in November. A revision in inventories of textile mills products, which extends back to 1963, is being incorporated in the figures for the first time with the release of the December figures. This revision has the effect of lowering the level of stocks of textile mill products and also the total for nondurable goods by close to $300 million in recent months. New and unfilled orders and shipments of durable goods manufacturers all rose considerably more in December than the exceptionally large increases indicated by the advance figures and discussed in the January 31 Greenbook. According to the preliminary figures, new orders advanced 12.0 per cent, unfilled orders, 1.4 per cent, and shipments, 7.5 per cent. However, the final estimates for November show substan- tially smaller gains for each of these three series than indicated by the preliminary figures--particularly for the new and unfilled order series. As a result, changes from October to December are little different from those indicated earlier. -2 - The Domestic Financial Situation The Treasury announced a two-phase February financing on January 31. In the first phase, a new 7-year, 5-3/4 per cent note is being offered to holders of coupon issues maturing in February, August, and November 1968. The public holds $12.1 billion of the issues eligible for exchange, including $1.7 billion of those maturing in February. Books will be open February 5 to 7 and settlement will be on February 15. This combined refunding and prerefunding will be followed by a cash offering of $4.0 billion new 15-month notes on February 13 with payment date on February 20. Initial market reaction to the financings has been favorable and price adjustments in outstanding coupon issues have been small. Bill rates were marked down a few basis points following the announcement in anticipation of re-investment demand from sellers of issues eligible for exchange into the new 7-year note. Correction Page IV-6, third paragraph. Last sentence should read: "In total, imports of industrial materials (including fuels) were 2.6 per cent of final sales of goods (GNP less services and changes in inventories) in the fourth quarter, equal to the ratio in first quarter and larger than in the middle two quarters." - 3KEY INTEREST RATES 1967 High Nov. 17 1/ 1968 Feb. 2 Jan. 8 Short-Term Rates 3-months Treasury bills (bid) Bankers' acceptances Euro-dollars Federal agencies Finance paper CD's (prime NYC) Highest quoted new issue Secondary market 6-months Treasury bills (bid) Bankers' acceptances Commercial paper Federal agencies CD's (prime NYC) Highest quoted new issue Secondary market 1-year Treasury bills (bid) Federal agencies Prime municipals Intermediate 5.07 5.63 6.88 5.30 5.88 (12/15) (12/29) (11/28) (12/29) (1/6) 4.67 4.88 5.75 5.05 5.13 5.02 5.50 6.13 5.35 5.50 4.85* 5.13 5.44 5.05 5.13 5.50 (12/29) 5.70 (12/29) 5.25 5.30 5.50 5.63 5.25 5.25 5.60 5.88 6.00 5.55 5.13 5.35 5.63 5.63 5.65 5.00* 5.25 5.50 5.25 (12/1) (12/29) (1/16) (12/29) 5.00 5.13 5.40 5.50 (12/29) 6.00 (12/29) 5.38 5,60 5.50 5.95 5.50 5.50 5.71 (12/29) 5.95 (12/29) 4.00 (12/29) 5.27 5.75 5.40 5.95 3.85 5.19* 5.50 3.25 5.91 (11/13) 5.81 (11/20) 5.72 5.53 5.34 5.60 5.70 6.25 (12/28) 6.98 (12/28) 6.13 6.76 6.23 6.91 6.12 6.80 6.55 (12/7) 6.53 6.68 6.32 6.16 6.29 4.33 3.98 4.38 4.15 4.16 3.90 3.40 and Long-Term Treasury coupon issues 5-years 20-years Corporate Seasoned Aaa Baa New Issue Aaa With call protection Without call protection Municipal Bond Buyer Index Moody's Aaa FHA home mortgages 30-years 1/ Pre-devaluation yield levels. * 2:00 p.m. quotations. 6.70 (12/1) 4.45 (12/7) 4.15 (12/28) 6.81 (Dec.) 6.77(Nov.) 5.38
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