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Prefatory Note The attached document represents the most complete and accurate version available based on original files from the FOMC Secretariat at the Board of Governors of the Federal Reserve System. 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. Content last modified 03/07/2014. Class III FOMC - Internal (FR) June 20, 2008 CURRENT ECONOMIC AND FINANCIAL CONDITIONS Supplemental Notes Prepared for the Federal Open Market Committee by the staff of the Board of Governors of the Federal Reserve System Tables Commercial Bank Credit .............................................................................1 Selected Financial Market Quotations .........................................................2 ii -1- Commercial Bank Credit (Percent change, annual rate, except as noted; seasonally adjusted) Type of credit Level1 May 2008 2007 Q4 2007 Q1 2008 Apr. 2008 May 2008 10.4 Total H2 2007 10.9 9.4 6.7 -5.3 2.2 9,005 Loans2 Total To businesses Commercial and industrial Commercial real estate 11.3 11.3 10.5 9.9 .2 2.7 6,817 19.2 10.1 25.2 9.8 27.5 9.0 15.8 9.3 12.2 11.0 3.2 6.7 1,490 1,645 To households Residential real estate Revolving home equity Other Consumer Originated3 Other4 5.8 5.7 5.8 7.9 7.2 16.7 -1.4 6.4 -4.0 10.8 9.4 20.8 -5.4 7.3 -9.6 10.6 8.4 20.9 5.5 11.0 3.5 7.5 7.7 12.4 2.0 19.9 -4.3 9.2 9.5 -44.7 -6.0 12.7 -12.8 6.2 8.1 9.0 1,876 508 1,369 822 1,237 984 7.6 -6.7 27.9 9.7 -6.6 30.0 6.0 -17.9 34.2 -2.7 -7.4 2.1 -22.5 -5.4 -39.8 .8 5.2 -4.0 2,188 1,128 1,060 Securities Total Treasury and agency Other5 Note. Yearly annual rates are Q4 to Q4; quarterly and monthly annual rates use corresponding average levels. Data have been adjusted to remove the effects of mark-to-market accounting rules (FIN 39 and FAS 115), the initial consolidation of certain variable interest entities (FIN 46), the initial adoption of fair value accounting (FAS 159), and the effects of sizable thrift-to-bank and bank-to-thrift structure activity in October 2006, March 2007, and October 2007. Data also account for breaks caused by reclassifications. 1. Billions of dollars. Pro rata averages of weekly (Wednesday) levels. 2. Excludes interbank loans. 3. Includes an estimate of outstanding loans securitized by commercial banks. 4. Includes security loans and loans to farmers, state and local governments, and all others not elsewhere classified. Also includes lease financing receivables. 5. Includes private mortgage-backed securities; securities of corporations, state and local governments, and foreign governments; and any trading account assets that are not Treasury or agency securities. C&I Loan Rate Spreads Return on Assets at Commercial Banks Basis points Percent 240 Quarterly 220 2.0 Quarterly, s.a.a.r. 100 largest banks All other banks 1.5 Weighted average Q2 200 Q1 180 Q1 160 Weighted average adjusted* 1.0 0.5 Q2 140 0.0 1998 2000 2002 2004 2006 2008 Note. Spreads over market interest rate on an instrument of comparable maturity on loans less than $25 million (2006$). *Adjusted for changes in nonprice loan characteristics. Source. Survey of Terms of Business Lending. 1992 1996 Source. Call Report. 2000 2004 2008 -2- III-T-1 Selected Financial Market Quotations (One-day quotes in percent except as noted) 2007 Change to June 19 from selected dates (percentage points) 2008 Instrument Aug. 6 Jan. 31 Apr. 29 June 19 2007 Aug. 6 2008 Jan. 31 2008 Apr. 29 5.25 3.00 2.25 2.00 -3.25 -1.00 -.25 4.74 4.72 1.92 2.02 1.44 1.70 1.87 2.23 -2.87 -2.49 -.05 .21 .43 .53 Commercial paper (A1/P1 rates)2 1-month 3-month 5.26 5.29 2.95 2.98 2.50 2.83 2.36 2.72 -2.90 -2.57 -.59 -.26 -.14 -.11 Large negotiable CDs1 3-month 6-month 5.34 5.27 3.01 2.93 2.84 2.98 2.78 3.17 -2.56 -2.10 -.23 .24 -.06 .19 Eurodollar deposits3 1-month 3-month 5.33 5.35 3.15 3.15 2.90 3.15 2.70 2.95 -2.63 -2.40 -.45 -.20 -.20 -.20 Bank prime rate 8.25 6.00 5.25 5.00 -3.25 -1.00 -.25 Intermediate- and long-term U.S. Treasury4 2-year 5-year 10-year 4.49 4.52 4.82 2.16 2.83 3.86 2.28 3.11 4.04 2.94 3.70 4.44 -1.55 -.82 -.38 .78 .87 .58 .66 .59 .40 U.S. Treasury indexed notes5 5-year 10-year 2.43 2.48 .68 1.35 1.10 1.71 1.24 1.84 -1.19 -.64 .56 .49 .14 .13 Municipal general obligations (Bond Buyer)6 4.51 4.39 4.68 4.76 .25 .37 .08 Private instruments 10-year swap 10-year FNMA7 10-year AA8 10-year BBB8 10-year high yield8 5.44 5.34 6.12 6.57 9.21 4.23 4.28 5.62 6.39 9.80 4.39 4.53 6.01 6.82 9.80 4.86 5.01 6.51 7.06 9.95 -.58 -.33 .39 .49 .74 .63 .73 .89 .67 .15 .47 .48 .50 .24 .15 Home mortgages (FHLMC survey rate) 30-year fixed 1-year adjustable 6.59 5.65 5.68 5.05 6.06 5.29 6.42 5.19 -.17 -.46 .74 .14 .36 -.10 Short-term FOMC intended federal funds rate Treasury bills1 3-month 6-month Record high Change to June 19 from selected dates (percent) 2008 Stock exchange index Level Dow Jones Industrial S&P 500 Composite Nasdaq Russell 2000 Wilshire 5000 Date Jan. 31 Apr. 29 June 19 Record high 2008 Jan. 31 2008 Apr. 29 14,165 1,565 5,049 856 15,807 10-9-07 10-9-07 3-10-00 7-13-07 10-9-07 12,650 1,379 2,390 713 13,897 12,832 1,391 2,426 719 14,033 12,063 1,343 2,462 738 13,759 -14.84 -14.20 -51.23 -13.78 -12.96 -4.64 -2.59 3.02 3.44 -.99 -5.99 -3.46 1.48 2.63 -1.95 1. Secondary market. 2. Financial commercial paper. 3. Bid rates for Eurodollar deposits collected around 9:30 a.m. eastern time. 4. Derived from a smoothed Treasury yield curve estimated using off-the-run securities. 5. Derived from a smoothed Treasury yield curve estimated using all outstanding securities and adjusted for the carry effect. 6. Most recent Thursday quote. 7. Constant-maturity yields estimated from Fannie Mae domestic noncallable coupon securities. 8. Derived from smoothed corporate yield curves estimated using Merrill Lynch bond data. _______________________________________________________________________ NOTES: August 6, 2007, is the day before the August 2007 FOMC meeting. January 31, 2008, is the day after the January 2008 FOMC meeting. April 29, 2008, is the day before the most recent FOMC monetary policy announcement. _______________________________________________________________________
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