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(CONFIDENTIAL FR) March 16, 1973 MONETARY AGGREGATES AND MONEY MARKET CONDITIONS Prepared for the Federal Open Market Committee By the Staff BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM CONFIDENTIAL (FR) March 16, 1973 MONETARY AGGREGATES AND MONEY MARKET CONDITIONS Recent developments (1) M1 now appears to be growing at an annual rate within the Committee's February-March range of tolerance, as shown in the table. Growth of M2 is near the high end of its February-March target range. RPD is growing above the upper limit of its range, chiefly because heavy loan demands have led banks to expand large CD's much more rapidly than anticipated. The combination of very rapid acceleration in CD growth and the maintenance of Treasury tax and loan balances at unexpectedly high levels (as a result of foreign central bank purchases of special Treasury certificates) has ballooned growth in the credit proxy to an estimated February-March annual rate of 18 per cent, far in excess of what was indicated at the last Committee meeting. Growth of Monetary Aggregates and RPD in February-March Peiod (SAAR in Percentage Points) Ranges of Tolerance RPD -2-1/2 Current Estimates to +2-1/2 5 M1 3 to 8 6 M2 2 to 7 6-1/2 Memo: Federal funds 6 to 7 7.13 (Week ending March 14) (2) Early in the inter-meeting period, incoming data suggested that RPD and M2 were both running above their February-March ranges of tolerance; by the end of February, M 1 also seemed to be moving to the upper limit of its range. In these circumstances, since the Federal funds rate had already been averaging around the 6-3/4 per cent maximum contemplated at the mid-February meeting, the Committee members concurred in the Manager's recommendation of March 1 that the upper limit be raised to 7 per cent to provide a little more elbow room for open market operations in case of need. This permitted the Manager to restrain somewhat further the provision of nonborrowed reserves. At the same time the pressure of loan demand on commercial banks caused spirited bidding for funds. Des- pite resistance by the Desk, the funds rate tended to persist above 7 per cent, and in the most recent statement week averaged 7.13 per cent. Over the full inter-meeting period, the funds rate has risen about 55 basis points, on top of the roughly 150 basis points rise that occurred during the preceding three months. (3) Rate increases on short-term market instruments have generally matched or exceeded the rise in the Federal funds rate since the last meeting, although the spread of the funds rate over the 3-month bill rate remains relatively wide. Rates on large CD's with maturities just under 90 days have advanced as much as 100 basis points during the intermeeting period; Treasury bill rates are up 75-100 basis points--with the 3-month issue most recently bid close to 6.20 per cent; and even the interest rates on commercial paper--the issuance of which has been reduced by borrower shifts to the alternative use of bank credit--have risen 75-85 basis points. The Federal Reserve discount rate was raised one- half per cent to 5-1/2 per cent, effective February 26, and a rise in the bank prime rate from 6 to 6-1/4 per cent occurred at about the same time. Market rate increases in recent days have been fueled partly by expectations that a further discount rate hike is impending. (4) In markets for longer maturity securities, upward pressures on yields have been relatively less intense than in short markets, with advances ranging generally from 10 to 30 basis points. Special factors have tended to limit the extent of the rise on corporate, U. S. Treasury, and Federal agency securities; in the case of corporates, the calendar of new utility and industrial bond offerings has been unusually light, while in the case of Treasury coupon and Federal agency issues a foreign central bank--shifting out of bills-has been a persistent large buyer. Municipal bond yields, on the other hand, have been under increasing pressure from sizable current offerings and a large forward calendar as well as from a falling off in bank portfolio acquisitions. (5) The table on the following page shows (in percentage annual rate of change) selected monetary and financial flows over various time periods. The slowing of growth in M 1 and M2 over the first two months of 1973 has helped offset the surge in December 1972. Over the 3 months ending in February, M1 has grown at a 6.3 per cent annual rate and M 2 at an 8.2 per cent rate. Growth rates over the past 6 months are slightly higher, and over the past 12 months are higher still. Past 3 Calendar Years Dec. '72 over Dec. '69 Past 12 Months Feb. '73 over Feb. '72 Past 6 Months Feb. '72 over Aug. '72 Past 3 Months Feb. '73 over Nov. '72 Past Months Feb. '73 over Jan. '73 Total reserves 8.4 10,2 8.8 8.2 -21.9 Nonborrowed reserves 8.8 4.4 -0.3 -6.8 -41.0 Reserves available to support private nonbank deposits 9.0 9.6 10.4 8.1 7.5 7.4 6.5 6.3 6.1 M 2 (M1 plus time deposits at commercial banks other than large CD's) 11.3 9.6 8.7 8.2 5.9 M 3 (M2 plus deposits at thrift institutions) 12.8 11.8 10.8 10.2 8.5 10.7 12.3 12.0 12.8 16.4 12.4 15.3 16.3 17.3 21.9 32,3 15.1 9.7 7.6 4.4 3.1 1.7 2,3 1.5 - 1.5 - 4.6 Concepts of Money M1 (currency plus demand deposits)1/ Bank Credit Total member bank deposits (bank credit proxy adj.) Loans and investments of commercial banks 2/ Short-term market paper (Actual $ change in billions) Large CD's Nonbank commercial paper 1/ Other than interbank and U. S. Government. 7/ Based on month-end figures. Includes sold to affiliates and branches. NOTE: All items are based on averages of daily figures, except for data on total loans and investments of commercial banks, commercial paper, and thrift institutions--which are either end-of-month or last-Wednesday-of-month figures. Prospective developments (6) Presented below in summary form (with figures for aggregates representing seasonally adjusted annual rates of change) are March-April ranges for monetary aggregates and money market con1/ ditions associated with three alternative longer-run targets.1/ The longer-run targets are indexed by growth rates for M 1 of 7, 5-1/2, and 4 per cent over the next two quarters C, respectively. for alternatives A B, and These policy options tie in with the economic analysis of longer-run alternatives to be presented for FOMC considera- For purposes of the Blue Book dis- tion at the forthcoming meeting. cussion, Regulation Q ceilings are assumed to remain unchanged. Alt. A Alt. B Alt. C Longer-run targets (represented by growth rates for 2nd and 3rd quarters of 1973) M1 7 5-1/2 4 M2 9 6 4 10-1/2 9 8 9-1/2 8 6-1/2 23-25 12-14 4-6 Credit Proxy RPD Associated ranges for March-April 1973 Nonborrowed RPD RPD 15-1/2-17-1/2 13-1/2-15-1/2 5-1/2-7-1/2 5-7 8-10 7-9 6-8 5-3/4--7 6-1/2--7-1/2 M1 6-8 M2 Federal funds rate 14-1/2--16-1/2 7--8-1/4 1/ More detailed monthly and quarterly figures are shown in the table on page 6a. -6(7) Given the cumulative impact of monetary restraint, the staff believes that growth in the monetary aggregates at the rates shown for alternative B would involve little further change in money market conditions. Growth in M 1 for the March-April period is indicated at 5-1/2--7-1/2 per cent in this alternative, ranging a little above the longer-run target. This is due primarily to the assumed effect of larger-than- usual income tax refunds this year, which will also bolster time and savings deposits. RPD growth in the March-April period consistent with these aggregates is projected to be relatively large, however, partly because it reflects a further sharp increase in large CD's, and also because of the effects of lagged reserve accounting. (8) Assuming adoption of the somewhat larger growth rates for the aggregates as a longer-run target under alternative A, money market conditions would be likely to ease down through the range shown for that option over the next few weeks. On the other hand, an effort to secure a slowing in rates of growth in the monetary aggregates of the dimensions shown under alternative C would be likely to entail a further rise in the Federal funds rate from current levels. The pattern for this alternative shown in the detailed table on p. 6a assumes that the funds rate would rise to near the upper end of the 7--8-1/4 per cent range before the next Committee meeting. If the Committee wished to undertake a more gradual tightening--for example, constraining the rise in the funds rate to around 8 per cent over a two-month period--the staff would still expect a significant slowing in growth of the aggregates over time. The slowing, however, would probably be somewhat delayed with M 1 expected to expand at a 5 per cent annual rate in the second quarter and 4 per cent in the third. - 6-a - Alternative Longer-Run Targets for Key Monetary Aggregates M1 1973 Feb. Mar. Apr. May June 256.7 257.9 259.7 261.1 262.2 256.7 257.9 259.5 260.6 261.4 256.7 257.8 259.3 260.1 260.8 53.5 533.9 538.3 542. 1 545.4 530.5 533.8 537.4 539. 8 541.9 530.5 533.7 536.8 538.3 539.4 414.8 421.6 423.8 425.8 431.6 414.8 421.6 423.3 424.9 430.4 414.8 421.5 422.9 423.8 428.7 Sept. 267.1 265.0 263.1 558.1 549. 2 543.9 443.6 440.8 438.3 Rates of Growth 6.5 6.5 4.5 6.0 3.5 5.5 15.0 9.5 11.0 15.0 8.5 9.5 15.0 7.0 9.0 7.0 7.0 19.5 6.5 19.5 5.0 19.5 4.0 4.0 5.5 5.5 Months: Mar. Apr. 1973 C Adjusted Credit Proxy Alt. A Alt. B Alt. C Alt. 4.0 6.5 7.5 Alt. Alt. C Alt. A Quarters: 1973 1st. Q. 2nd. Q. 3rd. Q. B M2 Alt. B Alt. 3.5 4.5 3.5 6.5 8.5 9.5 5.0 7.0 7.5 10.0 Feb. Mar. Apr. May June Total Reserves Alt. A Alt. B Alt. C 31,654 31,654 31,654 31,978 31,980 31,988 32,119 32,163 32,215 32,261 32,183 32,090 31,831 31,978 32,096 Sept. 32,726 Quarters: 1973 Months: Mar. Apr. 1st. Q. 2nd. Q 3rd. Q 8.5 1.5 8.0 12.5 8.5 A 7.5 8.0 RPD Alt. A 29,299 29,653 30,111 30,259 30,450 Alt. B 29,299 29,645 30,060 30,183 30,337 Alt. C 31,080 Rates of Growth 30,860 30,640 29,299 29,643 30,017 30,091 30,191 32,511 32,290 8.5 8.5 -2.0 6.0 11.0 8.5 11.0 9.5 7.0 11.0 7.5 6.0 12.5 5.5 14.5 18.5 14.0 17.0 14.0 15.0 6.5 12.5 7.0 Even assuming little change in the Federal funds rate (9) from current levels, the 3-month bill rate is likely to continue to rise over the next few weeks, perhaps moving up in a 6-1/4--6-1/2 per cent range. In addition to the continued pull on the bill rate from a funds rate of around 7 per cent, the Desk is likely to be a sizable seller of bills during the first half of April because of an expected substantial decline in the Treasury balance at the Fed prior to midApril tax collections. The Treasury balance at the Fed has recently risen to an exceptionally large $4 billion as the bulk of the recent outflows of funds to abroad was reinvested by official institutions in Treasury specials. If a sizable reflow of these funds should develop, upward interest rate pressures in the Treasury bill market would be particularly strong, assuming that foreign central banks dispose of Treasury issues as demand for dollars increases, and the bill rate could well rise above the indicated range. (10) Short-term rates outside the Treasury bill area appear to have already adjusted more fully than short-term bills to prevailing money market conditions, but nevertheless some of these rates could rise somewhat further. Rates on negotiable CD's maturing in over 90 days offered by large banks are apparently at or near ceilings. With these banks crowding CD borrowing even more into the short-term area, shortterm CD rates are likely to rise. As costs of bank funds rise, there will be further pressure on bank lending rates and policies. With pressure continuing on the short-term rate structure, long-term rates -8are likely to increase further as investors become more reluctant to make long-term commitments at current rates and as borrowers begin to seek to nail down funds in the bond market. (11) A tightening of the money market from currently prevailing conditions would lead to rather substantial further upward adjustments in short- and long-term interest rates. For instance, if the funds rate were in a 7-1/2--8 per cent range, we would expect increases of about 1/2--3/4 percentage point in short-term market rates (other than longerterm CD's which are at ceiling rates), and sizable accompanying rises in long-term rates. (12) Upward pressures on short- and long-term interest rates partly reflect the necessity for banks and other savings institutions to adjust to a significant slowing in the rate of inflow of consumer-type time and savings deposits. Such a slowing would be expected under alter- native B, and would be even more marked under alternative C; however, this does not allow for any change in Regulation Q ceilings on consumer-type time and savings deposits. Banks and other institutions would have to adjust to smaller inflows by adopting more stringent commitment policies, reducing liquidity, and reducing their participation in bond markets. addition, large banks would remain aggressive issuers of CD's, and savings and loan associations would begin borrowing actively from Federal Home Loan Banks. In Proposed directives (13) Presented below are three alternative formulations for the operational paragraph of the directive, which might be taken to correspond to the similarly lettered policy alternatives discussed in the preceding section. The reference to credit markets is pro- posed for elimination only in alternative A, the only alternative that contemplates a significant easing of the money market. In view of uncertainties as to how the current international exchange crisis will be unwound, a reference to international developments is suggested for all three alternatives. Alternative A To implement this policy, while taking account of and]international market credit domestic possible [DEL: develop- ments, the Committee seeks to achieve bank reserve and somewhat-slower] money market conditions that will support [DEL: than growth in monetary aggregates over the months ahead [DEL: on] occurred AT ABOUT THE average RATES OF in the past 12 months. Alternative B To implement this policy, while taking account of possible domestic credit market and international developments, the Committee seeks to achieve bank reserve and money market conditions that will support somewhat slower growth in monetary aggregates over the months ahead than occurred on average in the past 6 months. -10- Alternative C To implement this policy, while taking account of possible domestic credit market and international developments, the Committee seeks to achieve bank reserve and money market conditions that will support[DEL: somewhat] SUBSTANTIALLY slower growth in monetary aggregates over the months ahead than occurred on average in the past 6 months. CHART 1 STRICTLY CONFIDENTIAL(FR) 3/16/73 RESERVES AVAILABLE TO SUPPORT PRIVATE NONBANK DEPOSITS BILLIONS OF DOLLARS 134 -- 30 I 1 I N D i 1972 1973 --28 S D 1971 *Break in Series Actual M J 1972 S D M J 1973 evel of RPD After Reduction in Reserve Requirements Effective November 9 7 F 1972 M STRICTLY CONFIDENTIAL (FR) 3/16/73 CHART 2 MONETARY AGGREGATES NARROW MONEY SUPPLY M1 -260 8% growth for Feb -Mar \ 1270 255 3% growth -250 I I I 1 -1 MONEY SUPPLY M2 1540 7% growth for Feb -Mar 2% growlh I N 1972 1971 1972 1973 I, I I JF I M 1973 A M CHART 3 STRICTLY CONFIDENTIAL(FR) 3/16/73 MONETARY AGGREGATES ADJUSTED CREDIT PROXY BILLIONS OF DOLLARS 420 , -- 380 _] I i J TOTAL RESERVES 33 31 q JI I A I I 1971 *Break I 1 1 J J I 1972 in serses Actual Level of Total Reserves After Reduttion ! ' I 1973 RnReserve R~equirerifnts I I N 0 1972 J I F M 1973 iftectve November 9, 1972 A CHART 4 MONEY MARKET CONDITIONS AND INTEREST RATES ONEY MARKET CONDITIONS INTEREST RATES Short-term PER CENT WEEKLY AVERAGES WFFKLY AVFRAGF ' INTEREST RATES Long-term PER CENT 7 PER CENT WFEKLY -9 -9 FHA MORTGAGES FNMA MONDAY AUCTION FEDERAL FUNDS 1 I~ 5 - 7 Aaa UTILITY NEW ISSUE EURO DOLLARS 3 MONTH FR OISCOUNT RATE -3 , BILLIONS OF DOLLARS SERVES -I « / MUNICIPAL Aaa / WEDNESDAY GOVERNMENT BONDS '10 YEAR AVERAGES - 2 TREASURY BILLS + V l 3 MONTH PRIME COMMERCIAL PAPER 46 MONTH NET BORROWED 1972 1972 5-5 55 / BORROWED BORROWD 1971 1971 3 1973 1973 1971 1971 1972 1972 1973 1973 1971 1971 1972 1972 I 1973 1973 TALE RANK 1 STRICTLY CONFIDENTIAL MARCH 16, rFFERVES 1973 "-"-----------------------------------***-*****-*-*---******---------------------------------"ttrHVES AVATLAPLE FOR PHWVAITL UNMPNK DEPOSITS IIAGGREGATE RESERVES I REQUIRED RESERVFS I- -----------------------------------------------------... II------------------------------------------------St45ONALLY ADJUSTD I '07 SEASONAtLY ADJUSTtn II SEASONALLY ADJUSTFD -------------------------- I---------------I--------------t-----------------ACTUAL I ACTUAL II NONI TIME AND GOV T. AND I ANM II TOTAL BORROWED I PRIVATE NONAND PERIOD PROJCTOED PROJCTED I REStRVfS RESERVES I DERANO DEPOSITS INTFIRRN ------ *----------*-------(1 I ?1 II -1 3(1--IS) (--7--(1) 1(P7 If 13) 14) 1 I5) I6) (7) MONTHLY LEVELS-SMILLIONSI -----------------------1972--bEPT. OCT. I NOV. I DEC. 1973--JAN. FEB. MAR. ANNUAL RATES OF CHANGE ---------------QUARTERLY 1972--1ST 2ND 3RD 4TH 0TH. QT. UTH. UTN. 30.890 309973 29.496 28.862 30.609 30.830 29,529 29.211 29.411 29.209 (29.645) 30.384 29.373 129.366) I I I I I WEEKLY LEVELS-SILLIONS -*-----.----------*-1972--NOV. I 15 22 29 FEB. MAR. ?1,209 21.263 19.553 18.883 9.411 9.473 9.600 19.248 19.031 119.102) 9.900 10.058 (10.344) ( 6.5) 10.7 13.1 -0.8 4.8 ( -2.5) 6.6 3.6 ?.8 8.3 9.739 2,4p3 2,387 2.447 2,832 ( 2*313 -1.9 10.2 22.8 -4.6 1 14.0) 35.8 -21.9 1 12.51 ( I ( ( (-18.51 I -4.5 21.241 1942 18.621 180777 -6.1 15.5 9.8 -10.9 11.4 12.5 5.0) -5.01 31.3 -41.0 4.01 8.8 20.6 -1.5 hI.S 7.9 16.1 17.4 17.2 9.2 23.2 -13.5 4.51) 30.910 29.665 28,546 28.750 30.-79 29.460 28.463 2B.806 13825 31.950 30t748 30.836 32.570 31.347 30.372 30 .44 6 13 20 27 2BI7B0 28780 28.691 28953 26. 726 20884 28.408 29.?14 29.358 31.123 31.094 31.429 31.194 30*.46 29.707 29.893 30.181 1R.756 18,949 3 10 17 24 31 29.367 29.241 29.915 28.958 29.549 30.P92 30.034 31.044 30.105 31.959 31.898 33.245 31.791 32.151 7 14 21 28 29.167 29.111 29.671 29.249 79.5;91 ?Q.314 29.457 31.60R 31 56A 31.945 31.496 7 S 29 *11 29.389 29.170 I 30.194 78.931 9*.044 11 .?74 31.7at 16.9 13.6 16.1 33.9 4.5) 1 25.01 I 12.9 3.2 20.8 7.7 I I FE.-MAN. 1973-JAN. 30.848 29.793 10.4 12.6 3.6 14.2 ( 11.0) 3972--SEPT. DEC. 32.242 31.AS4 33,299 31.297 30.063 (31.69) 331*.980) (P9.893) 10.4 6.6 9.9 10.6 I MONTHLYI - -* 1973--JAN. FEB. MAR. 32,670 I 1973-1ST UTN. OCT. NOV. DEC. 33,327 339832 31.883 31.309 19.8 19.2 I 36.0) 1 27.0) 9.552 9.572 9.630 2.915 2,299 9.647 2.016 9.689 2.3*33 9.717 2.403 9.772 9.772 ?.47' 18.857 2.4*6 29,886 31.007 31.720 30.537 3n,57f6 19.230 19.293 19.682 19.084 19.139 9.826 9.883 9.912 9.901 9.933 2.92 2.657 32130 30.284 29.511 19.046 10.957 9.958 2*442 2.*97 2.274 79.531 29.767 18.979 10.026 10.076 10.171 30.213 19.243 18.995 10.210 10.281 19.143 29.214 2.20 2.610 2.399 - - - - -- - - - - - - - - - - - -------------------------------- -- - - - - - -- - - - - - - - - - - - - -NOTE: OATA SeIoN 11 T PUktNTMESLS AHE CURF.*T PHOJfCTIONS. 1971 TMF ruMMITTfF AbRFEO ON A uPn RANGF OF - ?-l/2 TO 1/ AT ThI FOMC MEE INC FEaN~ARY 13 -//. Eq CLNT. - - - -- - - - - - - - - -- - - - - - - - - -- - - - - - - - -- - - - - - - - - -- - - - - - - ------- - - - - "------------------ -- - - -- TABLE 2 STRICTLY CONFIDENTIAL *---*-----*-------MARCH 16, AGGREGATES MONETARY (ACTUAL AND CURRENT PROJECTIONS, SEASONALLY ADJUSTED) I I I PEkIOD I MUNEY SUPPLY NARROW I HROAD (I1) I 1(21 (1) I 250.1 251.6 252.7 256.5 I I I I I I I I I I I 255.4 256.7 (257.9) I I I MONTHLY LEVELS-HILLO --------------197,--LPT. OCT. NOV. DEC. I I I 1971--JAN. tH, CIA . (2) 512.1 516.4 TEHLY I 1972--IST OTH. fNU QTT. 3RD QTI. TH OTR. I I I I 1973--1ST I Tk. I I I I 527.9 530.b I I I l. b. 13.3 1 I I - 1973--JAN. FLH. MAN. FLH.-MAR. WEEKLY LEVELS-$PILLIONS -.... --1972--NOV. 8 15l 22 29 I I .b6 t.1 I 5.5) 1 I I 6.01 1 I 1 I b6 13 70 27 I I I 252.4 253.2 253.0 1b.5 I 54.1 253.9 296.5 256.9 I I I I I I I I I II It II II I1 II II II I II II II 1 I I IS) 5.1 6.3 h.9 6.6 1 I I I 301.9 304.8 308.4 312.8 7.1 7.? ( 7.3) I I 316.9 32?.6 1330.1) (4) ti. I ) I I I I I ( 6.5 1 8.7 10.1 7.9 1 .2 6.4 5.9 ( .5) S 6. ) I 1 1 I I I I I I 11.0 11.5 9.8 12.1 (15.0) II 1I II II I 1 9.5 11.9 10.5 13.4 II| 1l II II II 1 1 I I I I II 11 II I II II II I II II II 11 II 11 II 11 II 1 8.3 16.4 (19.5) 11 .0) 1 s 18.7 i20.3 570.4 519.2 I 401.4 400.2 408.3 402.7 522.1 572.0 625.9 b§7.3 I I ) I 404.2 603.9 406.3 407.9 30.2 76.2 b 2.b6 921.8 21.7 I I I I I I I I I I1 7 14 I I 256.3 256.4 I I 579.0 ,1 I 25.3 I 532.4 I 533.2 I ----------------------------------------- 217.7 2?7.0 ) I ( ) I I 262.0 264.8 267.1 269.6 I I 39.8 40.0 41.2 4 3.2 272.5 273.8 1275.9) I *4.4 48.8 (4.1) I I 1 III 530.4 122.0) 12.0 11.5 1.2 17.1 7.5 6.2 5.9 .1 I I 1 I 1 I I I I 1 I I I I I (8 4.1 4.3 4.3 4.4 I I I I 4.5 4.5 4.8) I I I I I I 1 1 I I I 12.9 5.7 ( 9.01 25.0) I I I 310.0 311.2 312.8 314.3 I I I I I 1 I I 1 533.1 532.6 I I -------- I 266.3 267.1 267.4 267.8 I I I I I 268.0 268.2 269.4 270.4 I I 411.3 413.0 9.5 6.9 I I 320.1 322.2 I I I 1 I 417.5 II M.6 I 323.2 I 274.1 417.2 II 7.9 325.0 1 274.4 272.0 271.6 272.6 72.7 273.4 I I I 272.8 274.0 I 42.0 43.0 43.4 43.9 I I I 4.0 4.3 4.4 4.4 I I I 4.4 4.2 4.4 4.6 43.5 44.0 43.9 44.5 45.5 I 4.4 4.1 4.6 4.7 4.7 I 47.3 48.2 I 49.1 1 4.5 4.4 I 4.4 0.7 4.7 I 419.3 -------------- 41.0 60.8 41. 1.8 I 315.5 315.6 316.7 317.3 318.9 --- I I I 7.5 1 1 I 1 I 1 I I 307.4 307.9 308.8 309.6 1 1 1 I 10.2 12.8 10.4 11.2 .6 7.2 6.8 6.9 6.7 I I II ( 9.5) 15.7 21.6 128.01 I 7.4 6.1 6.7 7.3 16.1 10.8 12.3 11.6 I I I II If 11 II II IIII II II 412.0 * 407.4 409.4 1 409.1 I 409.8 1 15.4 4.8 1*.0 14.4 II 7.4 I 327.5 I 275.5 II 6.7 1 329.4 I 275.6 It I - - - -- - - - - -- - - - - - - - ---"-------- - - - - - - -- -P NOTIJ DATA SHU-N IN PARENTFSES ARE CURHENT PROJFCTIONS. PE ANNkUAl NAl (IF CANl F O'HFl TP aT THOSE FOR THE PAST ARE ROUNDED TO THE 7 P 14 P*I ---------------------- I 16) I NONDEPOSIT I SOURCES OF I FUNDS (I (I -N. I I 1 II 25.2 254.6 25.T 25t.0 254.3 256.9 I I I I II I I I P7 r1 1 I I I 3 1I 17 24 I 1 AND SAVINGS DLPOSTTS I I OTHER I THAN CD S I CD S I II 1971--Jlt. T11E TOTAL I 12.1 4.5 10.3 10.2 I I I 409.2 114.8 14 1.6) II U.S. II bOVT. II DEPOSITS II 1 I I 394.5 398.4 401.9 406.4 I ... I .I. 7.2 1 (533.8) ( 4.0)1 II MONTHLY ------1972--SEPT. UCT. NOV. OD C. Utr. 9.2 6.1 8.2 8.6 (31 I I I 1 19. %26.1 -------------------- *-*****-* ADJUSTFI CkEtIT PROXY I I PERCENT ANNUAL 6bOWTH QU I I I - 52.0 53.7 4.8 4.8 I - - - - - - - - - - - PRELLINARY PARTIALLY ESTIMATED NEAREST HALF PFRCENT. I ------ - ----- 1973 STRICTLY CONFIDENTIAL (FR) MARCH 16, 1973 Table 3 RESERVE EFFECTS OF OPEN MARKET OPERATIONS AND OTHER RESERVE FACTORS (Millions of dollars, not seasonally adjusted) Bills & Accept. (1) Open Market Operations 1_/ s Coupon Agency RP' 3 Issues .Issues Net (2) (3) (4) Total (5) Daily Average Reserve Cffect 2/ Open Market A Member Other 4/ Operations Bank Borrowing Factors (6) (7) (8) in reserve categories req. res. against available res.5/ U.S.G. and interb. (6)+(7)+(8)-(9) (9) (10) A Target available reserves5/ (11) Monthly 1972 -- Sept. Oct. Nov. Dec. 1973 -- Jan. Feb. Mar. Apr. -158 Ill -548 450 -116 -51 -135 -35 -22 157 134 -816 --147 -1,009 205 -442 596 1,336 659 -196 --18 862 -193 2,197 644 1,116 - 134p --- ----- 3,680 -2,375 729 860 -581 4,194 -2,223 838 1,016 95 1,135 -150 341 141 884 -1,617 1,124 -226 - 25 76 59 32 443 376 117 428 1,370 -378 -1,835 -839 p -395 493 -651 - 78 224 312 1,378 -343 405 335 -1,520 -300 995 -1,140 -45 -1,54 p 278 -107p 1,331 -1,143 -605 1,115 552 -1,438 -1,051 229 160 493 -559 -245 934 -258 1,010 -939 290 4 Weekly 1973 -- Jan. 3 10 17 24 31 514 152 109 156 676 Feb. 7 14 21 28 -561 -4 383 842 -196 -- --18 -2,493 2,274 -1,034 1,059 -3,055 2,270 -454 1,883 -1,020 110 647 -62p -77 759 -319 -193p 375 -890 - 99 -481p Mar. 7 14 21 28 -159 446 -- -14 -1,856 1,827 -2,015 2,259 781p 293p 208p -196p -333p -505p 1/ 2/ 3/ 4/ / 633 -1,063 610 -201 212 82 256 -114 -10p 2 6 8 p -84 -804 -277 343 6 - 72 p 370p -324p Represents change in System's portfolio from end-of-period to end-of-period; includes redemptions in regular bill auctions. Represents change in daily average level from preceding period. Includes matched sale-purchase transactions as well as RP's. Sum of changes in vault cash, currency in circulation, Treasury operations, F.R. float, gold and foreign accounts, and other FR accounts. Reserves to support private nonbank deposits. Target change for February and March reflects the mid-point of the target range adopted at the February 13, 1973 FOMC meeting. Target change for previous months reflects the bluebook patterns that are consistent with the mid-points of target ranges that were adopted during the moeth. STRICTLY CONFIDENTIAL (FR) March 16.1973 Table 4 SECURITY DEALER POSITIONS AND BANK RESERVES Millions of Dollars TT.S. Govt. Security Dealer Positions Coupon Is Issues Period (2) (1) 1971 -- High Basic Reserve DeficTt 8 New York 38 Other (8) (9) 343 1,180 84 202 -988 -4,714 -1,545 -5,499 -2,569 1,223 12 380 -1,070 -5,635 -1,638 -5,720 -1,910 4,291 1,916 1,585 -93 1972 -- Feb. Mar. 2,408 3,489 1,176 604 Apr. May June 2,612 2,792 2,694 July Aug. Sept. Oct. Nov. Dec. Jan. Feb. Jan. Feb. Mar. ------ at FRB (6) Bank Reserve P Net Free Reserves (7) 2,834 High L6w Notes; Mb oi rowings 4,733 1,350 -- 1973 -- Excess Reserves Low 1972 1973 -- Other Security Dealer Positions Corporate Municipal Bonds _ onds 33 90 91 150 -3,203 -3,208 -3,072 -3,522 274 675 205 109 119 94 27 -15 110 -3,026 -2,625 -2,828 -3,299 -2,652 -2,864 2,262 2,643 4,099 97 692 170 202 438 514 -55 -183 -352 -2,945 -3,913 -3,835 -2,603 -2,801 -4,024 2,887 3,096 3,510 207 1,039 953 132 191 291 574 606 1,049 -327 -292 -830 -3,637 -4,561 -4,977 -4,044 -3,622 -4,958 720 562 177 123 1,165 9 1,5 3p -823 -1,418p -4,550 -4,187 -5,469 -5.436 142 150 193 224** 157 1,751 688 1,298 1,097 1,309 -1,191 -562 -957 -1,131 -856 -4,957 -5,189 -5,243 -4,480 -3,324 -5,116 1,232 1,991 1,670 79 1,4 p -1,085 -1,803 -1,167 -1,479p -3,686 -4,906 -4,527 -3,628 -5,407 -5,765 -4,883 -5,829 1, 8 p 1,491p -1,383p -l,400p -3,875p -5,047p -6,279p -5,878p 3,407 *2,132 * 3 10 17 24 31 3,718 3,212 3,606 3,527 3,118 871 843 652 687 659 7 14 21 28 2.293 2,304 *1,683 *2,191 642 1,125 * * 362 190 170 112 155 104 7 14 21 28 *1,976 *1,969 * * 11 -73 126 130p 6 7 --- -5,9')2 -6,044 -5,599 -4,839 - Trading positions, which exclude Treasury bills financed by repurchase Government Security dealer trading positions are on a commitment basis. Other security dealer positions agreements maturing in 16 days or more, are indicators of dealer holdings available for sale over the near-term. The basic reserve deficit is excess reserves less borrowing at Federal Reserve in syndicate, excluding trading positions. are debt issues still Weekly data are daily averages for statement weeks, except for corporate and municipal issues in syndicate which less net Federal funds purchases. are Friday figures. ** Includes $132 million of Washington Metropolitan Transit Authority bonds. STRICTLY CONFIDENTIAL * CONFIDENTIAL (FR) MARCH 16, 1973 Table 5 SELECTED INTEREST RATES Per Cent S Federal Funds Period 1 1971 -- High Low dreaur 90-day .. t -t r biars I 1-year 1 I I , Prime-NYC 90-119 day Commercial Pa er f I 60n-R Aav T 0. 8 o--. 9n-11Q drav ... (6) Aa litlity New Recently Tassa n Offerd, (8) " L ong-tm U S. Cov't. Municipal FNMA Auction (10-Yr. Constant Bond Buyer Yields I._ aturit I (11) 5.75 3.63 8.19 7.14 8 09 7.29 1972 -- High Low 5.50 3.50 7.46 7.12 7 72 7 54 1972 -- Feb Mar. 3.53 3.98 7.31 7.24 7 61 7 54 Apr May June 4.47 4.33 4.50 7,40 7 38 7.36 7 58 7.63 7.63 July Aug Sept 4.75 4.78 5.00 7.37 7.34 7.42 7 63 7 63 7.65 Oct Nov. eec 5.19 5.13 5.38 7.38 7.18 7.18 7 72 7 71 7 68 5.75 6.28 7.35 7.41 7 69 7 72 5.50 5.63 5.75 5.88 6.00 7.26 7.32 7.36 7.41 7.41 Feb. 7 16 21 28 6.25 6.25 6.38 6.38 7.43 7.39 7.37 7.45 Mar 6.75 6.75 7.50 7.60p 1973 -- Jan Feb. 1973 -- Notes: Tan. 3 10 17 24 31 7 14 21 28 "'or tolms I, 8 and 1 the Columns 5 and 6 are one-day Wedoesdav qis. statement week averages of daily data. weekly data for columns 1 ti 4 arr. l Calumn 9 is a one-day quote for the lnursday following tie end of weekly date is the mid-point of he .alcndir week over which data are Oversaged, ion yield as the yield The FNMA nact the statement week. Column 11 gives FNMAauction date for the Monday preceding the ond of the statement week. in the bi-weekly auction for short-term forward cnmmitments for Government underwritten mortgages. 7.69 7 70 7 71 7 73 7.75 Appendix Table I CONFIDENTIAL (FR) RESERVES AND MONETARY VARIABLES March r r Keserves Money Stock Measures I Available to Period 7 Total Nonborrowed ~" ' (I) I (2) I Support Pvt. Peposits (3) --- 1 2 3 I(5)(6) (4) Total Credit Proxy Loans and Investments (7) (8) ( Other Rank Credit Measures AdjutEed 16,1973 Time Total Time (9) Other than CD's I (10) Thrift Institution Deposits (11) (rpr Cent Annual Rates of Growth) U.S. CD's (12) Nondeposit Funda (13) (Dollar Change Gov't. Demand i in (14) Billions) Annual ly +7.5 1968 1969 1970 1971 1972 -1.1 +6.1 +7.2 +10.6 +5.3 -2.8 +9.6 +8.1 +7.1 +8.1 -1.7 +8.6 +7.2 +9.7 +7.8 +3.6 +6.0 +6.6 +8.3 +9.3 +2.6 +8.4 +11.4 +10.8 +8.3 +2.9 +8.0 +13.5 +12.9 +9.5 +0.4 +8.2 +9.4 +11.6 +11.0 +3.9 +8.1 +11.3 +14.0 +11.5 -4.8 +17.9 +18.2 +15.5 +11.2 +1.4 +11.1 +16.7 +13.3 +6.4 +3.5 +7.7 +17.5 +16.7 +2.9 -12.4 +14.4 +7.7 +10.1 +2.6 +13.0 -8.4 -7.6 +0.4 -0.6 +0.5 +1.1 -0.3 +0.4 semi-Anom uly ist Half 1971 2nd Half 1971 +9.7 +4.1 +9.6 +6.3 +10.7 +3.4 +10.1 +1.0 +14.9 +7.4 +16.4 +9.8 +10.1 +8.4 +11.5 +10.6 +21.6 +13.4 +20.0 +12.1 +19.6 +14.0 +4.3 +3.4 -7.1 -0.4 -1.4 +1.1 let Half 1972 2nd Half 1972 +11.7 +9 0 +12.1 +2.0 +8.6 410.4 +7.7 +8.5 +10.8 +10,3 +13.0 +12.1 +11.4 +11.1 +12.8 +14.2 +15.4 +14.5 +13.7 +12.1 +17.3 +14.8 +4.4 +5.7 -0.3 +0.6 -+0.4 +6.6 +6.0 +3.2 +3.6 +4.1 +1.9 +6.0 +8.9 +10.5 +6.7 +9.7 +11.1 +9.8 +16.6 +8.0 +15.9 +14.2 +13.3 +1,7 -0.4 +1.1 +1.8 -0.3 -0.4 +0.5 -1.1 +1.4 QOarterly 3rd Qtr 4th Otr 1971 1971 +6.5 +2, 1 iat Qtr. 2nd Qtr 3rditr. Ath Qtr 1972 1972 1972 1972 +10 4 +12.6 +3.6 +14.2 +10.7 +13.1 -0.8 +4.8 +10.4 +6.6 +9.9 +10.6 +9.2 +6.1 +8.2 +8.6 +12.7 +8.5 +10.3 +10.2 +14.9 +10.7 +12.3 +11.5 +11.0 +9.8 +12.1 +15.7 +9.5 +13.6 +14.4 +15.4 +14.8 +14.0 +14.4 +16.1 +10.8 +12.3 +11.6 +19.7 +14.3 +16.2 +13.0 +0.8 +3.7 +2.4 +26.7 -5.7 +11.0 +21.7 +9.4 +8.0 +2.9 +0.7 -6.1 +15.5 +9.8 -10.9 +11.0 46.5 +13.4 +6.8 +3.9 +9.0 +6.9 +9.7 +12.9 +3.2 +20.8 +7.7 +1.0 +14.7 +11.5 +8.0 +4.0 +6.4 412.7 +4.6 +7.2 +7.2 +5.2 +13.3 +10.4 +15.1 +12.4 +7.9 +8.3 +9.2 +12.5 +9.3 +8.7 +10.1 +7.9 +12.2 +13.2 +16.8 +14.2 +10.7 +10.1 +11.1 +13.8 +11.6 +11.2 +12.0 +9.8 +12.2 +9.2 +7.2 +16.2 +12.2 +15.6 +6.6 +10.0 +9.6 +9.5 +11.9 +10.5 +13.4 +14.2 +12.4 +19.9 +5.4 +20.0 +2.3 +10.2 +18.3 +11.9 411.4 +20.6 +10.7 +17.7 +16.2 +11.6 +12.8 +18.2 +12.9 +13.6 +15.9 +12.0 +11.5 +14.2 +17.1 +19.2 +15.4 +13.2 +7.8 +13.0 +11.6 +12.3 +14.0 +10.2 +12.8 +10.4 +11.2 +23.3 +16.6 +18.2 +13.4 +21.6 +16.4 +16.7 +14.9 +16.3 +14.5 +12.1 +11.9 +0.1 +0.6 +0.1 +1.5 +1.5 +0.7 +0.8 +0.8 +0.8 +0.2 bec. +21.8 -5.2 +14 5 +22 1 +8. +6.4 +5.2 +7.6 -1 9 +18.2 +11.4 +12.5 +1.9 +0.1 Jan. Feb p +35 8 -21.9 +31., -41.0 +22.8 -4 6 -0.5 +6 1 +9.3 +8 5 +8.3 +16 4 +18 6 +21 9 +15.7 +21.6 +12.9 +5 7 +18.4 +8.0 +1.2 +4 4 +0.3 1969, and requirements Tan Feb. 1972 Mar Apr. Moav June Aug. Sept. Oct. Nov. 1973. NOTE. Reserve requireenta October 1, 1970. +8.7 +6.4 +5 9 on Eurodollar borrowings are included begnning October +9.8 +11.5 16. +3.3 +0.4 +0.3 -0.1 -0.3 -- j +0.1 -0.2 +6.2 +0.2 -1.7 +1.1 +1.1 +0.7 -1.3 -1.0 +0.1 +0.3 -0.1 +0.2 -0.7 +0.6 +1.2 +0.6 -0.4 +1.2 +0.5 +0.2 on bafhk-related colmercial paper are intcluded begifhing Appendix Table II CONFIDENTIAL (FR) RESERVES AND MONETARY VARIABLES (Seasonally adjusted, billions of dollars) Reserves er Ttalts (1) (2) 27,219 27,959 29,121 enasues Money Stock SAvailhle to Support Pvt Non- Bank A . Total I 2 3 IA) (7) () (4 (5) 26,416 26,699 28,727 24,791 26,975 201.6 208.8 221.3 158.2 162.7 172.2 577.2 594.0 641.3 31,209 31,060 28,907 236.0 183.4 31,776 31,639 32,021 31.751 31,601 31,891 29,172 29,329 29,656 236.2 239.1 241.4 183.3 185.8 187.7 Apr. flay 32,612 32,852 32,467 32,720 3Ine )3,027 32,938 29,824 29,920 30,144 243.0 243.8 245.1 .Jly Aug. Sept. 33.171 33,018 3.,381 33,038 13.327 32,870 30,317 30,562 30,890 Oct. Nov. Dec. 13,832 33,295 i1,883 31,297 i1,309 30,063 Annually: 0ec. 1968 1ec. 1969 bDc. 1970 I March 16, 1973 Credit Measures Adjusted Credit roxy Total I.ans and Investments (8) Other Total Time (10)i (9) Time Other than CO's Thrift nstltution Desosits (11) CD's NonDeposit Fu.nds u.S. Gov't. Demand (12) (13) (14) (15) 7.0 20.0 11.6 4.9 5.3 6.5 306.6 307.7 332.9 390.6 406.0 438.9 204.2 194.4 229.2 180.9 183.5 203.9 194.7 201.7 216.1 23.3 10.9 25.3 727.7 364.3 488.6 270.9 237.9 253.8 33.0 4.0 735.7 746.0 754.8 367.1 369.3 374.3 494.4 499.5 507.8 274.9 278,6 281.3 241.7 244.8 247.5 257.8 262.1 265.9 33.2 33.7 33.8 4.0 3.6 3.7 189.1 189.6 190.7 761,5 767.9 775.0 378,1 383.0 385.1 510.1 518.6 519.8 284.3 288.6 291.7 249.1 251.8 254.2 269.4 272.4 275.7 35.2 36.8 37.5 3.5 3.7 3.8 247.7 248.6 250.1 193.1 193.8 196.8 783.9 791.5 798.9 388.3 391.4 394.5 524.2 532.2 537.5 295.0 298,9 301.9 256.8 259.8 262.0 279.5 283.1 286.8 38.3 39.1 39.8 3.9 4.2 4.1 30,973 29,496 28,862 251.6 252.7 255.5 195.9 196.5 198.7 806.9 813.5 821.8 398.4 401.9 406.4 562.6 551.9 556.8 304.8 308.4 312.8 264.8 267.1 269.6 290.5 293.7 296.7 40.0 41.2 43.2 4.3 4.3 4.4 2.2642 30.848 11,656 29,793 29,411 29,299 255.4 256.7 198.4 199.3 828.3 834.2 409.2 414.8 565.4 575.7 316,9 322.6 272.5 273.8 300.4 303.7 44.4 48.8 4.5 4.5 3 10 17 24 31 11.959 11.898 29,886 31,007 200.8 197.4 198.7 198.0 197. 6 412.0 407.4 ::':: 409.4 609.1 Ii! !iii 409.8 43.5 44.0 4.4 4.1 4.6 4.7 4.7 7 14 21 28 p 11,608 31,568 31,945 31,696 30,284 29,511 29,767 29,554 29,167 29,111 29,671 29,249 256.3 256.4 258.3 255.9 198,9 199.0 200.6 198.5 411.3 413.0 417.5 417.2 272.0 271.6 272.8 272.7 273.4 272.8 ::::............... ii:::: :: :43.9 30,576 258.2 254.6 255.7 255.0 254.3 315.5 ;i !i iiiii!i !i!iii 12,158 29,367 29,241 29.915 28.958 29,548 320.1 322.2 274.0 323.2 274.1 : : .. : ...... ....................... 325.0 274.4 32.278 30,213 29,813 257,7 199.8 419.1 ::::::::.. 25,339 Honthly: 171--Dee. 7 19 2--.an. Feh. Mar. 1973--Jan. Feb. p Weekly: 97 1 3--nJn. Feb. Mar. 7 p 33,245 31,720 11,791 30,537 315.6 316.7 317.3 318.9 ::'::::: : 44.5 65 45.5 47.3 :48.2 49. 1 : 327.5 275.5 : ii :50. ii;i 52.0 4.5 4.4 4.4 4.7 4.8 :;::::::::::::::::! :!:::::::::::::::::: iiil iiiiiiiilil !!iiiiiiiii iiii ::::: .. ::::.:: ............. i NOTE: Reserve requirements on Euro-dollar borrowings are included beginning October 16, 1969, and requirements on bank-related commercial paper are included beginning October 1, 1970. Adjusted credit proxy includes mainly total member bank deposits subject to reserve requirements, bank-related commercial paper, and Euro-dollar borrowings of U.S. banks. Weekly data are daily averages for statement weeks. Monthly data are daily averages except for nonbank commercial paper figures which are for last day of month. Weekly data are not available for M3 total loans and investments and thrift institution deposits. p - Preliminary.
@FedFRASER