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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 02/07/2013. Class III FOMC – Internal (FR) June 22, 2007 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 Contents The Domestic Financial Economy .............................................................. Tables Commercial Bank Credit .................................................................1 Selected Financial Market Quotations .............................................2 1 Commercial Bank Credit (Percent change, annual rate, except as noted; seasonally adjusted) Type of credit Level,1 May 2007 2005 Q4 2006 Q1 2007 Apr. 2007 May 2007 10.6 Total 2006 9.6 4.4 8.7 11.8 7.5 8,224 Loans2 Total To businesses Commercial and industrial Commercial real estate 11.6 10.7 7.5 9.9 13.7 9.0 6,189 13.5 17.0 16.4 13.6 10.6 7.6 8.2 10.3 8.7 14.8 15.3 7.9 1,221 1,506 To households Residential real estate Revolving home equity Other Consumer Originated3 Other4 11.9 13.3 11.4 3.0 .7 8.6 7.2 1.5 9.3 5.2 6.4 10.9 5.4 1.8 6.7 .2 4.8 14.2 9.5 3.5 11.5 7.6 8.1 14.8 14.9 -3.4 21.1 9.6 1.2 20.1 .1 .0 .0 5.5 .6 23.6 1,821 455 1,366 750 1,130 891 7.5 .0 13.5 6.3 3.0 12.8 -4.8 -10.1 7.5 4.8 -1.8 10.4 6.2 -23.3 45.9 3.2 -13.6 28.1 2,036 1,150 1,069 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 consolidation of certain variable interest entities (FIN 46), the adoption of fair value accounting (FAS 159), and the effects of sizable thrift-to-bank and bank-to-thrift structure activity in October 2006 and March 2007 respectively. 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, foreign governments, and any trading account assets that are not Treasury or agency securities, including revaluation gains on derivative contracts. Delinquency Rates on Loans Loan-Loss Provisioning Percent, annual rate Percent of average assets 7 1.4 Quarterly Quarterly 6 5 Q1 1.0 4 Total loans and leases 1.2 0.8 3 0.6 Q1 2 Residential real estate 1 0.2 0 1991 1994 1997 2000 2003 0.4 0.0 2006 1991 Source. Call Report. 1994 1997 Source. Call Report. -1- 2000 2003 2006 III-T-1 Selected Financial Market Quotations (One-day quotes in percent except as noted) 2004 2006 Change to June 21 from selected dates (percentage points) 2007 Instrument June 28 June 29 May 8 June 21 2004 June 28 2006 June 29 2007 May 8 1.00 5.25 5.25 5.25 4.25 .00 .00 1.36 1.74 4.88 5.06 4.76 4.82 4.57 4.76 3.21 3.02 -.31 -.30 -.19 -.06 Commercial paper (A1/P1 rates)2 1-month 3-month 1.28 1.45 5.27 5.37 5.25 5.21 5.25 5.26 3.97 3.81 -.02 -.11 .00 .05 Large negotiable CDs1 3-month 6-month 1.53 1.82 5.47 5.59 5.31 5.31 5.33 5.36 3.80 3.54 -.14 -.23 .02 .05 Eurodollar deposits3 1-month 3-month 1.29 1.51 5.33 5.49 5.32 5.35 5.32 5.36 4.03 3.85 -.01 -.13 .00 .01 Bank prime rate 4.00 8.25 8.25 8.25 4.25 .00 .00 Intermediate- and long-term U.S. Treasury4 2-year 5-year 10-year 2.88 3.97 4.90 5.26 5.15 5.28 4.71 4.51 4.70 5.01 5.04 5.24 2.13 1.07 .34 -.25 -.11 -.04 .30 .53 .54 U.S. Treasury indexed notes 5-year 10-year 1.56 2.25 2.49 2.61 2.12 2.28 2.70 2.74 1.14 .49 .21 .13 .58 .46 Municipal general obligations (Bond Buyer)5 5.01 4.71 4.25 4.63 -.38 -.08 .38 Private instruments 10-year swap 10-year FNMA6 10-year AA7 10-year BBB7 10-year high yield7 5.21 5.38 5.60 6.25 8.41 5.81 5.59 6.20 6.74 8.74 5.17 4.99 5.60 6.07 7.94 5.75 5.59 6.18 6.63 8.30 .54 .21 .58 .38 -.11 -.06 .00 -.02 -.11 -.44 .58 .60 .58 .56 .36 Home mortgages (FHLMC survey rate) 30-year fixed 1-year adjustable 6.21 4.19 6.78 5.82 6.15 5.48 6.69 5.66 .48 1.47 -.09 -.16 .54 .18 Short-term FOMC intended federal funds rate Treasury bills1 3-month 6-month Record high 2006 Change to June 21 from selected dates (percent) 2007 Stock exchange index Level Dow Jones Industrial S&P 500 Composite Nasdaq Russell 2000 Wilshire 5000 Date June 29 May 8 June 21 Record high 2006 June 29 2007 May 8 13,676 1,539 5,049 855 15,569 6-4-07 6-4-07 3-10-00 6-4-07 6-4-07 11,191 1,273 2,174 714 12,846 13,309 1,508 2,572 831 15,203 13,546 1,522 2,617 840 15,376 -.95 -1.10 -48.16 -1.79 -1.24 21.04 19.59 2.35 17.57 19.70 1.78 .96 1.76 1.07 1.14 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. Most recent Thursday quote. 6. Constant-maturity yields estimated from Fannie Mae domestic noncallable coupon securities. 7. Derived from smoothed corporate yield curves estimated using Merrill Lynch bond data. _______________________________________________________________________ NOTES: June 28, 2004, is the day before the most recent policy tightening began. June 29, 2006, is the day the most recent policy tightening ended. May 8, 2007, is the day before the most recent FOMC announcement. _______________________________________________________________________ -2-
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