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June 25, 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 June 25, 1982 MONETARY POLICY ALTERNATIVES Recent developments (1) Though showing only a very slight rise on balance over the last two months, M1 grew over the March-to-June period at a 4 percent annual rate, somewhat above the Committee's 3 percent short-run objective. From the fourth quarter of 1981 to June, M1 is estimated to have increased at a 6.3 percent annual rate, almost 1 percentage point above the upper end of its 1982 range. Following a surge in late 1981 and early 1982, growth in the OCD component has slowed markedly on balance over the last few months, roughly in line with expectations built into the intermeeting M1 path; this slowing suggests some abatement in precautionary demands for funds. (2) M2 growth at an 8.7 percent annual rate over March-June also was somewhat above the Committee's second-quarter path, reflecting stronger than expected expansion of its nontransaction component as well as the overshoot in M1. From the fourth quarter of 1981 to June, M2 is estimated to have increased at a 9.3 percent annual rate, just above its longer-run range. The strength in M2 growth, accompanied by a substantial decline in its income velocity, suggests that enhanced liquidity demands affected this aggregate, as well as M1, over the first half of the year. In June, however, M2 growth slowed substantially. (3) Bank credit growth is estimated to have slowed markedly in June, after growing at about a 9 percent annual rate over the preceding two months. Business loan growth appears to have remained fairly rapid. Bank issuance of large CDs accelerated sharply in the past two months, sustaining growth in M3--which by June was just above the Committee's KEY MONETARY POLICY AGGREGATES (Seasonally adjusted, annual rates of growth) 1982 April May Junepe March to June Ml 10.7 -2.1 3.5 4.0 7.1 6.3 M2 10.0 10.5 5.4 8.7 9.6 9.3 9.7 14.5 6.1 10.2 10.4 10.3 11.9 10.7 8.2 10.3 9.7 9.7 9.3 8.6 4.4 7.4 9.53/ 7.8/ 0.5 16.0 0.8 5.8 2.7 3.1 Total reserves 2.7 4.4 2.0 3.0 5.2 4.8 Monetary base 9.2 9.0 6.4 8.3 7.6 7.6 1323 941 983 274 361 292 1981 Q4 to 1982:Q2Pe1982:June Money and Credit Aggregates (Nontransaction component) M3 Bank credit Reserve Measures- / Nonborrowed reserves Memo: / (millions of dollars) Adjustment borrowing Excess reserves n.a.--not available. pe--partly estimated. 1. Growth rates of reserve measures are adjusted to remove the effects of discontinuties 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. 3. Measured from December-January average base. pe -31982 range. Businesses have continued to tap the commercial paper market for sizable volumes of new funds. Bond issuance on domestic markets in May rose to its highest level since last fall, before subsiding more recently as bond yields moved higher. (4) Total reserves expanded at about a 3¼ percent average annual rate in May and June; with nonborrowed reserves growing at an 8½ percent rate over the two months, borrowing at the discount window fell about $340 million from the April level. Throughout the intermeeting period borrowing has remained above the initial level of $800 million specified by the Committee, averaging $950 million for the six weeks. Borrowing in excess of the initial level early in the period partly reflected increased needs for borrowed reserves resulting from unexpected shortfalls in reserve factors late in the week as well as apparent difficulties of some large individual institutions in gauging reserve positions.1/ Most recently, nonborrowed paths have implied borrowing around $1 billion, as money growth above Committee objectives has boosted the demand for total reserves relative to the path for nonborrowed reserves. (5) The federal funds rate has averaged around 14¼ percent during the two most recent full statement weeks,2 / compared with the 14½ percent area prevailing at the time of the May FOMC meeting. At the same time, however, other interest rates have risen about ½ to 1½ percentage points over the intermeeting period. Publication of money stock increases in early June, along with expectations of a further rise in July, affected market sentiment, as did the approach of a period of heavy Treasury financing demands and indications that economic activity was no longer 1/ Reserve paths and intermeeting adjustments are shown in Appendix I. 2/ Trading in the past couple of days has been in the 14¾-15 percent range, possibly reflecting cautious reserve management as the midyear statement date approaches. -4declining. Difficulties associated with the failure of Drysdale Government Securities in mid-May and the problems of Comark in early June appear not to have affected the attainment of reserve objectives by the System. How- ever, these episodes have fostered a heightened awareness of differences in credit risk throughout the securities markets, and some changes in quality spreads. Some smaller dealers have had to pay a higher premium for funds. (6) The rise in U.S. interest rates has contributed to the 7 3/4 increase in the weighted average value of the dollar since the May FOMC meeting. A secondary factor in the strength of the dollar has been its attractiveness as a safe-haven currency in the context of intensified hostilities in the Middle East. On Saturday, June 12, the European Monetary System realigned its currency band, devaluing the French franc and the lira and revaluing the mark and the guilder. When trading resumed on the Monday following the realignment, exchange markets were judged to be disorderly and the United States intervened for the first time since March 1981, purchasing $21 million equivalent of marks and $9 million equivalent of yen. -5Longer-run targets (7) Two options that seem reasonable under current circumstances in reconsidering the monetary aggregate targets for 1982 are retention of the present ranges (shown as alternative A below) or adoption of somewhat higher ranges (shown as alternative B).1/ The desirability of higher ranges depends in part on whether it is thought that the strong demands for liquidity of the first half of the year--reflected in declines in velocity of both M1 and M2--are likely to abate. It also depends, of course, on the degree of monetary restraint the Committee deems appropriate under current economic circumstances and on assessment of the expectational impact on interest rates and the economy of announced changes, if any, in target ranges. (8) Alt. A Alt. B M1 2½ to 5½ 2½ to 6 M2 6 to 9 6½ to 9½ M3 6½ to 9½ 6½ to 10 Whether the Committee retains its current longer-run ranges, or raises them modestly as in alternative B, a marked slowing in growth of M1 would be required from the first-half pace of a little over 7 percent at an annual rate (as measured from QIV '81 to QII '82). If the Committee were to aim at 5 percent growth for the year, expansion in the second half would have to slow to around a 2¾ percent annual rate. 1/ Second-half growth could Somewhat the same effect as raising the ranges could be obtained in the case of M1 by rebasing on the lower limit of last year's growth ranges rather than basing on the actual outcome, which would effectively raise the range by 1 percentage point. This had been discussed by the Committee last February. Whatever the advantages and disadvantages at that time, there is an added disadvantage now because the considerable time that has elapsed since the base period tends to make raising issues in connection with the base seem a bit strained. -6be about 4¾ percent at an annual rate if the Committee were to accept a 6 percent growth for the year. (9) It is believed that the degree of slowing in M1 growth implied by retention of the current longer-run target ranges is generally consistent with the staff's forecast of a moderate pickup in economic activity in the second half of this year, assuming growth in M1 over the year near the upper limit of its long-run range. Growth in M2 and M3 would be expected to be around the upper end of their ranges. An accelera- tion in the velocity of monetary aggregates is expected in the second half of the year--in the case of M1 to the 4½ to 5½ percent range. Apart from the positive impact of renewed economic confidence and reduced demands for precautionary balances on velocity growth, more intensive use of cash balances could emerge if there is a spread of sweep accounts or shifts out of cash into the kinds of highly liquid time deposit accounts that are being considered by DIDC at its forthcoming meeting. On the other hand, continued unusual demands for liquidity could damp the expected rebound in velocity, and make it less likely that a significant upturn in economic activity would occur in the context of money growth within the bounds of the existing target ranges. (10) Factors relevant to the setting of tentative targets for 1983 include expectations about the impact on money demand of changes in financial structure and technology, progress in curbing wage-price pressures, and the continued need to encourage economic recovery. Un- certainties about the impact of financial innovation and public attitudes toward money and other liquid assets argue for maintaining relatively wide ranges for targets, such as the present 3 percentage points. Continuing progress toward price stability suggests that these ranges might be reduced next year, but slower growth in money next year can also be accomplished, of course, within the present ranges. (11) A reduction in 1983 of the upper and lower limits of the ranges for M1, M2, and M3 from their current levels by ½ percentage point would be consistent with the staff's GNP projection for that year--if actual growth in the aggregate were permitted to be near the upper limits of the ranges. The table on the following page summarizes implications for economic activity of various monetary policy strategies, as indexed by growth rates for M1. Strategy 1 underlies the staff's judgmental GNP projection, which is based on growth of M1 at a 5 percent rate in 1982, with growth declining by point in each succeeding year. The alternative projections are derived from differences calculated by the quarterly econometric model. (12) Strategy 2 projects the possible outcome of a modest increase in the target range for money this year, while returning to the strategy 1 assumptions for M1 growth in the next years. This approach tends to have a positive effect on economic activity this year, but it leads to a somewhat higher inflation rate over time and the probability of a noticeable rebound of interest rates in 1983 after a drop in the latter part of this year. This interest rate rebound contributes to a slowing in growth of economic activity in the latter part of the pro- jection period. Strategy 4 contemplates an increase in money growth this year and also more growth than under strategy 2 during the next two years. Economic activity would tend to be stronger over the three projection years, but the rate of price inflation, after falling for a while, begins to accelerate in 1984. The rate of inflation could, of course, pick up Economic Projections Associated with Alternative Long-run Monetary Growth Strategies 1982 1983 1984 Nominal GNP (0%,Q4/Q4) 1. 5 - 4% - 41/ 2. 6 - 4k - 4 / 3. 5 -3 -34. 6 - 5\ - 5- (judgmental) 5.8 6.6 5.8 6.6 7.5 7.8 6.6 8.8 Real GNP (,%,Q4/Q4) 3.0 3.2 2.2 4.0 2.3 2.0 1.6 2.8 Implicit Deflator (%, Q4/Q4) 5.3 5.3 5.3 5.3 4.3 4.5 4.2 4.6 Unemployment Rate (Q4) 1. 2. 3. 9.1 8.6 9.4 8.3 4. 8.7 8.2 9.4 7.4 Treasury Bill Rate (Q4) 1. 2. 3. 4. 11.8 10.6 11.8 10.6 12.5 12.3 13.7 11.3 11.7 12.0 12.6 11.3 1/ This array of figures represents assumptions about growth in Ml for the years 1982, 1983, and 1984, respectively, measuring growth on a QIV to QIV basis. Additional information on the interest rates believed consistent with strategy 1--the Greenbook forecast for 1982-83--may be found in Appendix II. earlier, with economic activity weaker, should such a monetary course itself have adverse effects on inflationary expectations. Strategy 3, which contemplates a more rapid deceleration in money growth over the next two years following 5 percent growth this year, produces the most rapid progress toward price stability but at the cost of stronger pressures on short-term interest rate and reduced real growth. With all of the monetary strategies, short-term interest rates remain relatively high in real terms. This evolves out of the continued strength in nominal income and associated money demand relative to money supply targets, with nominal income sustained by stimulative fiscal policy of the Federal Government whose credit demands are generally insensitive to interest rates. -10Alternative short-run targets (13) The table below presents three alternative sets of monetary targets for the third quarter, plus associated ranges for the federal funds rate during the intermeeting period. More detailed data for the alternatives are shown in the table on page 11. Alt. A Alt. B Alt. C M1 5½ 4 2½ M2 8½ 7¾ 7 Growth from June to September Federal funds rate range 10 to 15 11 to 16 12 to 17 (14) Under alternative A, M1 over the next three months would grow at a rate matching that of the upper bound of the Committee's current longer-run range. Because such a trajectory would mean that there would be no narrowing of the existing absolute gap relative to the top of the range, alternative A might be viewed as especially consistent with a decision to raise the 1982 range or to tolerate a small overshoot. Under alternative B, M1 would expand at a rate that, if sustained, would result in growth for the year at about the 5½ percent upper bound of the longerrun range, while alternative C contemplates growth in M1 which would move the aggregate to just within this year's range by September. Under all alternatives, the level of M2 by September would be around its upper limit-a bit above in the case of alternative A and somewhat below in the case of alternative C. (See charts on the next two pages). (15) Under any of the alternatives, growth of M1 in July probably will be relatively strong owing in part to special factors. The introduc- tion of lower income tax withholding schedules tends to boost M1 balances for a while since spending or investing patterns generally take some time Chart 1 CONFIDENTIAL (FR) Class II - FOMC Actual and Targeted M1 O N D J 1981 Note June level lapartly estimated. F M A M J J 1982 A S O N D Chart 2 CONFIDENTIAL (FR) Class II - FOMC Actual and Targeted M2 and M3 M2 - ACTUAL LEVEL ** SHORT-RUN ALTERNATIVES O N 1981 D F M A M J J A S N D 1982 M3 Billions of dollars -ACTUAL LEVEL * *SHORT-RUN ALTERNATIVES S23504 -2350 -1 2300 - 2250 -p - S-p.0* -12200 _.. 00* -p0 -- (2150 I I I O N 1981 Note: June levels D I J I F M I 1 A I M J J 1982 e partly estimated. A I S I I O N 2100 D Alternative Levels and Growth Rates for Key Monetary Aggregates M1 M2 M3 Alt. A Alt. B Alt. C Alt. A Alt. B Alt. C Alt. A Alt. B Alt. C 452.3 451.5 452.3 451.5 452.3 451.5 1880.7 1897.1 1880.7 1897.1 1880.7 1897.1 2257.9 2278.1 2257.9 2278.1 2257.9 2278.1 452.8 456.6 457.2 459.0 452.8 456.2 456.2 457.3 452.8 455.8 455.2 455.6 1905.7 1921.0 1934.3 1945.7 1905.7 1920.3 1932.3 1942.2 1905.7 1919.7 1930.3 1938.6 2293.6 2313.1 2330.4 2344.2 2293.6 2312.4 2328.4 2340.6 2293.6 2311.8 2326.4 2337.1 10.7 -2.1 3.5 10.1 1.6 4.7 10.7 -2.1 3.5 9.0 0.0 2.9 10.7 -2.1 3.5 8.0 -1.6 1.1 10.0 10.5 5.4 9.6 8.3 7.1 10.0 10.5 5.4 9.2 7.5 6.1 10.0 10.5 5.4 8.8 6.6 5.2 11.9 10.7 8.2 10.2 9.0 7.1 11.9 10.7 8.2 9.8 8.3 6.3 11.9 10.7 8.2 9.5 7.6 5.5 5.5 4.0 2.5 8.4 7.7 6.9 8.8 8.2 7.6 1982--Ql Q2 10.4 3.7 10.4 3.7 10.4 3.7 9.8 9.3 9.8 9.3 9.8 9.3 8.7 10.5 8.7 10.5 8.7 10.5 Q3 4.8 3.9 2.9 8.3 7.8 7.4 9.3 8.9 8.5 6.1 5.7 5.2 9.2 8.9 8.7 9.6 9.4 9.2 1982--April May June July August September Growth Rates Monthly 1982--April May June July August September June-September Growth Rates Quarterly Average Memo: Growth Q4 '81 to September '82 -12to adjust to changes in disposable income. Growth in July is also likely to be increased in some small degree by enlarged social security benefits stemming from this year's COLA which will be paid out just prior to the long July 4th holiday weekend. (16) The growth of M1 at a 4 percent pace specified in alterna- tive B for the whole June-September period is not expected to be accompanied by upward interest rate pressures despite the anticipated strengthening in nominal GNP. It seems likely that transaction demands for cash in the third quarter will be satisfied in part by liquidity built up earlier this year. The federal funds rate might be at or somewhat below the 14¼ percent level of recent statement weeks, trading generally in a 13-14¼ percent range. At the current 12 percent discount rate, adjustment borrowing from the discount window likely would be in the $800 million to $1 billion area. With expansion in total reserves at a 5 percent annual rate over the quarter, a nonborrowed reserve path calling for growth at a slightly faster rate would be implied. (17) Other short-term rates might decline some under this alternative, with the 3-month bill rate moving back toward 12 somewhat lower. percent or Bond yields might also decline a little, but any break- out from the rate range of the past few months probably would require in addition more favorable fiscal policy developments or indications that economic recovery, and associated private capital demands, will be weaker than now generally anticipated. However, Treasury borrowing in the third quarter is currently estimated by the staff at about $50 billion, considerably higher than announced to date by the government and possibly more than generally anticipated in the market. Barring a large decline in longer-term rates, corporate bond issues are likely to remain limited. -13Business borrowing at banks and in short-term markets may taper off, but, if so, is likely to be replaced by a reduced accumulation of liquid assets, following the apparent second quarter surge. Household borrowing is likely to remain restrained, owing to the deterrent effects of high real interest rates and lender caution. (18) Alternative A, which targets faster growth in M1 than alternative B, could well produce a fairly substantial decline in money market rates. An increase in total reserves on the order of from June to September would be consistent with the rate specified for M1 during the quarter. 5½ 6¼ percent percent growth The federal funds rate likely would decline to a zone somewhat above the present discount rate, with adjustment borrowing falling into the $300 to $500 million range. Assuming borrowing were to average about $400 million, growth of nonborrowed reserves would be 12 percent. The easing of the funds market likely to occur under this (19) alternative should result in a substantial lowering of market rates generally. The 3-month Treasury bill rate probably would fall to around the 11-11½ percent area and the decline in bank costs of funds would likely push the prime rate down. Mortgage rates would again begin declining, encouraging moderately stronger loan demand in that sector. Lagging yields on money market funds would tend to strengthen M2 and M3 a bit in the short run as more aggressive money managers shift away from market instruments. In exchange markets, the dollar likely would probably decline substantially; this tendency could be limited to a degree, however, if foreign central banks responded by seeking an easing of their domestic interest rates. (20) Alternative C sets the most restrictive monetary target, with M1 growth during the third quarter specified at only 2½ percent. -14It seems likely that the more restrained reserve provision consistent with such growth would place further pressure on the money markets, with the federal funds rate moving to 15 percent or a bit higher over the intermeeting periods. Borrowing at the discount window would rise to the vicinity of $1½ billion, and nonborrowed reserves would drop at a 1½ percent annual rate over the quarter. (21) The firming in the funds market expected under alternative C should be accompanied by moderately higher market rates generally but with the likelihood that commercial paper and CD rates may rise more rapidly than Treasury bill rates as concerns about spreading financial problems are exacerbated. The 3-month bill rate may be in a 13 to 13½ percent range, and 3-month CD rates could move above 16 percent. pressures would inhibit the upturn in aggregate demand. rate likely would rise, as would primary mortgage rates. Financial The bank prime The dollar probably would come under further substantial upward pressure in exchange markets. -15Directive language (22) directive. Given below is a suggested operational paragraph for the The specifications adopted at the meeting on May 18 are shown in strike-through form. In the short run, the Committee seeks behavior of reserve to aggregates consistent with growth of M1 and M2 from March June TO SEPTEMBER at annual rates of about [DEL: 3] ____ percent and [DEL: 8] ____ percent respectively. [DEL: The Committee also noted that deviations from these targets should be evaluated in lightof relative importance of NOW accounts a as changes the in savings vehicle.] 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 persistently outside a range of [DEL: 10 to 15]____ TO ____ percent. APPENDIX I RESERVE TARGETS AND RELATED MEASURES INTERMEETING PERIOD (Millions of dollars; not seasonally adjusted) Date Reserves ?ath Constructed Reserve Targets for Intermeeting Period Average NonTotal borrowed Reserves Reserves (1) (2) Projection of Reserves Demanded for Period Average Total Reserves Required Reserves (4) (3) 6-Week Period: Excess Reserves (5) Implied Adjustment Borrowing For Remaining Period Statement Average Weeks 1/ (6) (7) May 26 to June 30 May 21 28 39,4012/ 39,385-, 38,6012/3/ 38,570-- 39,401 39,409 39,101 39,120 300 289 800 839 800 828 June 4 812 I/ 39,355 , 38,525 .- 39,368 39,049 319 843 11 39,428/6 38,5676/-- 39,478 39,164 314 911 821 18 39,373- 38,512- 39,487 39,193 293 975 1014 25 39,373 38,513- 39,472 39,161 311 959 1014 Represents borrowing in remaining statement weeks (as intermeeting period progresses) implied by each weekly updating of the period average nonborrowed reserves path. The movement in implied borrowing represents deviations in total reserves from target as well as any combensation for misses in nonborrowed reserves from target in earlier weeks of the intermeeting 2f period. Total and nonborrowed reserves paths adjusted downward by $16 million due to changes affecting the reserves multiplier. 3/ Nonborrowed reserves path adjusted downward by $15 million to offset the increased demand for borrowing in the week of May 26. 4/ Total and nonborrowed reserves paths adjusted downward by $30 million due to changes affecting the reserves multiplier. 5/ Nonborrowed reserves path adjusted downward by $15 million to offset the increased demand for borrowing in the week of June 2. Total and nonborrowed reserves paths adjusted upward by $73 million due to changes affecting 6 the reserves multiplier. 7/ Nonborrowed reserves path adjusted downward by $31 million to offset the increased demand for borrowing in the week of June 9. 8/ Total and nonborrowed reserves paths adjusted downward by $55 million due to changes affecting the reserves multiplier. 9/ Adjustment of reserves paths for available estimates of multiplier changes would have led to a sharp increase in the implied borrowing level just prior to FOMC meeting. To avoid such an increase in the implied level of borrowing, the nonborrowed reserves path was left essentially unchanged. Appendix II Interest Rate Assumptions Underlying the Greenbook GNP Forecast (Quarterly average, percent) 3-month Federal funds Treasury bills Recently Offered Corporate Bond- Fixed Rate Mortgage Commitment 14.23 12.81 15.68 17.39 Q2 14% 12-3/8 15k 16% Q3 13% 12k 15k 16-5/8 Q4 13k 11% 15 16% 1983--Ql 13% 11% 15 16k Q2 13% 12 15 16% Q3 14 12% 15 16k Q4 141 12k 15 16k 1982--Ql NOTE: Ml is assumed to grow 5 percent in 1982 and 4% percent in 1983. Table 1 Selected Interest Rates Percent Pertod federal funds Short-Term Treasury bills CDs E se a uct secondary cucoy omm. market _3.month| I1-year 1 S 2 3 6-month 4 market paper 3month 5 &month 6 June 28. 1982 Long-Term money market bank mutual prime fund 7 loan 8 U.S. government constant maturity yields 3year 9 corporate Asa utility muni. cipal recently home mortages secondary market Bond primaryA 10year 10 30yar 11 offered 12 Buyer 13 con". 14 auction 15 security 16 1981-Hish Low 20.06 12.04 16.72 10.20 15.05 10.64 15.85 10.70 18.70 11.51 18.04 11.26 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-Hgh1 Low 15.61 12.42 14.41 11.46 13.51 11.66 14.36 11.59 15.84 12.94 15.39 12.59 13.89 11.77 16.86 15.75 15.01 13.70 14.81 13.51 14.63 13.13 16.34 15.11 13.44 11.82 17.66 16.63 18.04 16.27 16.56 15.17 1981-Hay June 18.52 19.10 16.30 14.73 14.29 13.22 15.33 13.95 18.27 16.90 17.56 16.32 15.56 16.92 19.61 20.03 15.08 14.29 14.10 13.47 13.60 12.96 15.48 14.81 10.79 10.67 16.40 16.70 16.93 16.17 15.31 15.02 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 17.00 17.23 16.09 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 Oct. Nov. Dec. 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 14.85 12.16 12.12 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 1982-Jan. Feb. 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 13.09 14.53 13.80 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 14.94 14.45 12.70 12.09 12.50 11.98 12.86 12.22 14.44 13.80 14.06 13.42 13.74 13.49 16.50 16.50 14.18 13.77 13.87 13.62 13.37 13.24 15.44 15.24 12.59 11.95 16.89 16.68 - 15.40 16.27 15.30 15.15 14.68 15.01 14.72 13.17 12.85 12.53 12.42 12.69 12.59 12.49 12.32 12.80 12.90 12.72 12.64 14.55 14.58 14.53 14.20 14.18 14.21 14.17 13.77 13.70 13.73 13.89 13.64 16.50 16.50 16.50 16.50 14.38 14.24 14.13 14.05 14.14 13.90 13.74 13.71 13.67 13.38 13.21 13.20 15.65 15.39 15.27 15.55 12.99 12.54 12.29 11.97 16.91 16.93 16.86 16.81 - 15.72 15.41 15.23 15.22 5 12 19 26 15.53 14.97 14.67 13.70 12.57 12.32 12.27 11.53 12.39 12.05 12.07 11.66 12.78 12.24 12.19 11.68 14.31 13.82 13.92 13.49 13.90 13.51 13.49 13.09 13.59 13.75 13.65 13.29 16.50 16.50 16.50 16.50 14.06 13.70 13.78 13.66 13.87 13.51 13.58 13.59 13.39 13.13 13.25 13.20 15.29 15.31 15.17 15.20 12.04 11.82 11.96 11.99 16.78 16.63 16.67 16.63 June 2 9 16 23 30 13.43 13.60 14.24 14.17 11.79 12.13 12.20 12.70 11.86 12.17 12.39 12.94 11.59 12.12 12.50 13.03 13.52 13.81 14.10 15.00 13.11 13.37 13.67 14.40 12.94 13.02 13.05 13.01 16.50 16.50 16.50 16.50 13.86 14.03 14.29 14.89 13.81 13.96 14.13 14.63 13.50 13.70 13.80 14.18 15.39 15.59r 16.11 16.20p 12.13 12.40 12.63 12.62 16.65 16.70 16.71 n.a. 14.11 14.71 14.95p 12.73 12.99 13.19 13.00 13.03 13.12 15.05 15.12 15.42 14.48 14.46 14.81 16.50 16.50 16.50 14.87 14.98 14.94p 14.62 14.71 14.76p 14.19 14.20 4 2 1 . 5p Mar. Apr. May June 1982-Apr. 7 14 21 28 May Daily-June 18 24 25 - - NOTE Weekly data or columns 1, 23, and 5 through 11 ae statement week averages. Weekly data In col umn 4 are average rates set In the auction of 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-ay quotes for Friday and Thursday, respectively, following the end of the statement week. Column 14 Is an average of contract Interest rates on commitments lo conventional first mortgages with OD percent loan-t-value ratios made by a sample of insured savings and loan associations on the Friday - 15.59 16.27 15.17 - 15.26 15.18 - 15.57 - 15.58 15.85 17.22 16.14 following the end of the statement week. The FNMA auction yield s the average yield In bi-weely sucfon for shor-term forward commitments for goverment undereralen 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 FHNAVA mortgages carrying the coupon rate 50 basis points below the current FHANA ceiling. FR 1367 (1/82) Table 2 Net Changes In System Holdings of Securities1 June 28, Millions of dollars, not seasonally adjusted Period Treasury bills net change 2 3 Treasury coupons net purchases 1-year l__ 1-5 i-ea 5within 5-10 over 10 4 Federal agencies net purchases total withi 1-year -yeartoa 1-5 5-10 over 10 1982 Ne t RP totall Net change outright tota 1,433 127 454 668 494 10,035 8,724 10,290 2,035 8,491 -2,892 -1,774 -2,597 2,462 684 Net Ps 1977 1978 1979 1980 1981 4,361 870 6,243 -3,052 5,337 517 1,184 603 912 294 2,833 4,188 3,456 2,138 1,702 758 1,526 523 703 393 553 1,063 454 811 379 4,660 7,962 5,035 4,564 2,768 1981-Qtr. I II III IV -2,514 2,135 2,912 2,803 -23 115 122 80 469 607 626 .64 64 .65 89 182 108 -23 836 976 979 -2.555 2,944 3.855 4,247 -1.694 -1,352 424 3,305 1982--Qtr. I II -4.329 20 50 70 -4,371 -999 1981-Dec. 2,170 80 526 3,045 767 1982-Jan. Feb. Mar. -3,356 148 -1,121 -3,424 191 -1.134 900 -3,770 1,871 4,979 -325 4,877 -6,290 450 690 2,322 687 450 685 2.352 687 -6,184 2,715 4,781 -740 5 12 19 26 -219 -700 315 280 586 -700 315 280 -2,264 1,313 2,493 -4,168 June 2 9 16 23 30 386 1,123 50 386 1,117 50 5,071 -5,140 598 168 141.7 -1.6 Apr. May June 1982-Apr. 7 14 21 28 May LEVEL-June 23 - 165 108 81 4,149 -324 53.4 - 14.2 37.6 10.7 52 16.8 835 79.3 2.2 5.3 0.9 0.5 9.0 1 Change from end-of-period to end-of-peiod. 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 Tree2 Outright transactions in market and with foreign accounts, and redemptions (-) in bill auctions. sury coupon issues. 3 Outright transactions in market and with foreign accounts, and short-term notes acquired in ex6 Includes changes in RPs (+), matched sale-purchase transactions (-), and matched purchase-sale change for maturing bills. Excludes redemptions, maturity shifts, rollovers of maturing coupon transactions (+). issues, and direct Treasury borrowing from the System. 4 Outright transactions in market and with foreign accounts only. Excludes redemptions and maturity .4,:'.. STRICTLY CONFIDENTIAL (FR) CLASS II-FOMC Table 3 Security Dealer Positions and Bank Positions Millions of dollars Underwriting U.S. ovement securities dealer positions .Period nsyndicate positions cash futures and forwards corporate municipal bills coupons bills coupons bonds bonds June 28, 1982 excs * reesevs adje t itions Member bank reserve borrowing at FRB ** seasnal at~lnded (includes special total 15,668 540 4,633 540 -12,865 -4,535 -4,676 -2,514 268 11 562 -21 2,597 145 309 30 464 * 2,912 317 9,335 800 7,916 1,413 -11,097 -1,795 -4,739 -2,578 237 38 622 0 1,547 555 232 53 324 179 1,908 950 1,676 5,547 2,745 3,278 -6,486 -9,934 -2,822 -2,925 110 192 257 338 1,954 1,740 269 291 6 7 2,228 2,037 July Aug. Sept. 2,950 4,324 5,611 3,314 2,242 1,614 -8,340 -10,071 -9,830 -3,012 -2,972 -2,856 153 65 55 340 292 414 1,429 1,105 933 247 235 222 3 80 301 1,679 1,420 1,456 Oct. Nov. Dec. 4,781 5,037 2,185 1,629 3,821 2,289 -8,575 -7,120 -5,416 -3,655 -4,307 -4,150 59 106 172 278 344 319 591 403 433 152 95 54 438 165 148 1,181 663 636 1982-Jan. Feb. Mar. 3,527 4,557 6,594 4,803 5,322 5,653 -6,123 -7,726 -6,757 -3,116 -3,173 -2,909 52 97 104 418 304 361 1,245 1,426 1,073 75 131 158 197 232 308 1,518 1,790 1,556 Apr. May June 7,718 7,201 4,846 6,682 -5,555 -10,114 -3,393 -4,680 76 179 274 361 1,156 .706 167 235 245 176 1,568 1,117 Apr. 7 14 21 28 9,318 8,061 8,202 6,008 5.393 4,677 4.277 5,177 -1.795 -2,929 -6,602 -9,152 -2,578 -2,894 -3,546 -4,144 38 69 76 117 272 318 171 285 1,035 947 1,246 1,419 166 154 159 177 279 234 248 227 1,480 1,335 1,653 1,823 May 5 12 19 26 6,220 6,533 7,916 8,477 4.596 7,337 5.945 7,916 -8,449 -10,371 -11,097 -9,997 -3,969 -4,739 -4,692 -4,348 122 237 180 181 444 264 440 99 1,080 707 555 626 205 218 232 258 214 192 179 162 1,499 1,117 966 1,046 June 2 9 16 23 30 6,327 ** 8,609 ** 9,335** 5.946** 7.156 ** 5,148 ** 3,865** 3.527** -10,205 ** -4,111 ** -6,290 ** -2,998 ** -6,181** -2,758** -2,489** -5.275** 188 111 128 n.a. 67 2 p 170p 220p 281p 6 2 0p 217p 221p 253p 132p 115p 10 4p 96 p 1981--igh Low 1982-High Low 1981-May June 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. 6 56p 974 p 6 06p 666p 1,048p 1,306p 931p 1,015p Weekly data are daily averages for statement weeks, except for corporate and municipal issues ii syndicate, which are Friday figures. Monthly averages for excess reserves and borrowing are weighte 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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