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March 22, Strictly Confidential (FR) 1985 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) March 22, 1985 CLASS I - FOMC MONETARY POLICY ALTERNATIVES Recent Developments (1) M1 expanded during January and February at an 11-1/2 percent average annual rate, but partial data suggest that growth in that aggregate is moderating in March to about a 3 to 4 percent pace. Growth of M1 over the December-to-March period is currently estimated at around 9 percent, compared with the 8 percent rate specified by the FOMC. contributed to strength in January and February. All components of M1 Demand deposits were parti- cularly robust in February, but such deposits began to contract in early March. Inflows to Super NOW accounts have slowed following a pick-up in January when their minimum balance requirement was reduced; M1 as a whole does not appear to have been affected by this change. (2) March. As with M1, M2 and M3 are apparently decelerating markedly in For the three months, expansion of these two aggregates is estimated at 9-1/2 and 7-1/2 percent, respectively, compared with the 10 to 11 percent rates of growth set by the Committee. Over the course of the quarter, interest rate relationships became less favorable for retail deposits and money market funds. In addition, there was a considerable weakening in large CDs at thrifts in February and early March. (3) The debt of domestic nonfinancial sectors is estimated to have expanded at about a 12 percent annual rate on average during the first quarter, based on partial data. About 1-1/2 percentage points reflects substitution of debt for equity in mergers and corporate restructuring, assuming that the debt for equity swap of Phillips takes place by the end of March. Federal sector debt has continued to expand rapidly this quarter, -2- KEY MONETARY AGGREGATES (Seasonally adjusted annual rates of growth) 1 Dec. to Mar.1 QIV to Mar. 1 Jan. Feb. Mar. M1 9..0 14.1 3.6 9.0 9.5 M2 13.6 10.5 4.6 9.6 10.7 M3 10.1 7.9 4.7 7.6 9.3 Domestic nonfinancial debt 12.8 11.7 6.2 13.3 Nonborrowed reserves 3 39.1 15.6 2.0 19.1 20.3 Total reserves 31.1 19.7 1.5 17.6 17.5 Monetary base 8.0 12.3 8.3 9.6 9.2 Money and Credit Aggregates Bank credit Reserve Measures Memo: 2 (Millions of dollars) Adjustment and seasonal borrowing 485 5984 Excess reserves 899 7515 Note: Monthly reserve measures, including excess reserves and borrowing, are calculated by prorating averages for two-week reserve maintenance periods that overlap months. 1. Based on available data through March 18; the M1 estimate assumes increases in the March 25 and April 1 weeks. 2. Growth rates of reserve measures are adjusted to remove the effects of discontinuities resulting from phased changes in reserve ratios under the Monetary Control Act. 3. Includes "other extended credit" from the Federal Reserve. 4. Through March 20. 5. Reserve maintenance period ending March 13. -3although at a pace somewhat below that of the fourth quarter. Bond offerings by nonfinancial corporations in January and February were held substantially below the pace of the fourth quarter, while business borrowing from banks and in the commercial paper market picked up last month after showing little growth in January; business loans at large banks remained strong in early March. Expansion of household sector debt is estimated to have slowed slightly in the first two months of the year. (4) Reflecting the rapid growth of transactions deposits, total reserves are estimated to have expanded at a 17-1/2 percent annual rate from December to March, though growth decelerated month by month over the period. With borrowing at the discount window little changed, reserves increased at about the same pace. nonborrowed The nonborrowed reserves path for the intermeeting period was constructed on the assumption of $350 million of borrowing; as M1 strengthened relative to path, the Desk conducted its operations with a view to tilting the odds somewhat toward borrowing coming in above rather than below this level. Nonborrowed reserves generally have been close to target, but with the demand for excess reserves unexpectedly high, borrowed reserves have averaged around $600 million in the two complete maintenance periods since the last FOMC meeting; thus far in the current statement period borrowing has averaged around $500 million. (5) Federal funds traded mainly between 8-3/8 and 8-3/4 percent during most of the intermeeting period, averaging close to 8-1/2 percent, about the same level as in the first half of February. Other short-term rates have risen from 25 to 60 basis points, however, and bond yields are as much as 60 basis points higher. Lack of progress in deficit reduction efforts contributed to market expectations that credit markets would be tightening as the year progressed. In addition, continued strength in -4money growth over the first two months of the year led many to anticipate that monetary policy might soon have to tighten, if in process of doing so. it was not already The closing of non-federally insured Ohio thrift institutions had relatively little impact on domestic credit markets- or so far on the national pattern of deposit and currrency flows. bill Treasury rates dropped some 30 to 40 basis points relative to yields on private instruments immediately following the Governor's announcement in Ohio, but quality spreads subsequently moved back to around previously prevailing levels. (6) Since the last FOMC meeting, the weighted-average value of the dollar has declined, net, by 1-1/2 percent. wide in often volatile market conditions. Fluctuations have been The dollar rose sharply early in the intermeeting period when U.S. economic and monetary data proved stronger than anticipated. . The dollar subsequently retraced most of its earlier decline, but again depreciated very sharply in mid-March largely in response to concerns stemming from difficulties at Ohio thrift institutions and less favorable economic indicators. . The United States sold around $323 million of which $306 million was against marks and the remainder against sterling. Prospective developments (7) The table below provides three alternative specifications for growth in the monetary aggregates from March to June, along with associated ranges for the federal funds rate. (More detailed data, in- cluding implied growth from the fourth quarter to June, can be found on the table and charts on the following pages.) Alternative B, which appears consistent with roughly unchanged pressures on reserve positions, calls for money growth that would keep M1 in June around the upper limit of the parallel band that extends back from the endpoints of the longer-run range for the aggregate. A more marked slowing of money growth is specified in alternative C, keeping M1 within the band though still above the upper limit of the cone; alternative A contemplates somewhat more rapid money growth than B that would pull M1 above the upper limit of the band. Alt. A Alt. B Alt. C M1 7-1/2 6-1/2 5 M2 8 7 5-1/2 M3 8-3/4 8 7 Growth from March to June Associated federal funds rate range (8) 5-1/2 to 9-1/2 6 to 10 7 to 11 M1 growth at around a 6-1/2 percent annual rate from March to June under alternative B represents a fairly considerable moderation from the average pace of the past three months. Growth on a quarterly average basis would probably be around 6-3/4 percent, slightly higher than Alternative Levels and Growth Rates for Key Monetary Aggregates Monthly Levels M1 ----------------------------------Alt. C Alt. A Alt. B ---------- M2 -----------------------Alt. C Alt. A Alt. B ----- M3 -----------------------Alt. A Alt. B Alt. C -------- 562.7 569.3 571.0 562.7 569.3 571.0 562.7 569.3 571.0 2398.3 2419.3 2428.6 2398.3 2419.3 2428.6 2398.3 2419.3 2428.6 3020.5 3040.3 3052.2 3020.5 3040.3 3052.2 3020.5 3040.3 3052.2 574.3 577.9 581.7 574.1 577.2 580.3 573.9 576.2 578.1 2443.8 2460.4 2477.2 2442.8 2457.0 2471.1 2441.3 2451.6 2462.0 3073.6 3096.2 3119.0 3072.5 3092.8 3113.2 3071.8 3088.7 3105.6 9.0 14.1 3.6 9.0 14.1 3.6 9.0 14.1 3.6 13.6 10.5 4.6 13.6 10.5 4.6 13.6 10.5 4.6 10.1 7.9 4.7 10.1 7.9 4.7 10.1 7.9 4.7 7.0 7.4 7.9 6.5 6.5 6.4 6.0 5.0 4.0 7.5 8.2 8.2 7.0 7.0 6.9 6.3 5.1 5.1 8.4 8.8 8.8 8.0 7.9 7.9 7.7 6.6 6.6 10.3 7.3 10.3 6.7 10.3 5.9 12.0 7.5 12.0 6.9 12.0 6.0 10.5 7.7 10.5 7.3 10.5 6.7 Dec. 84 to Mar. 85 Feb. 85 to June 85 Mar. 85 to June 85 9.0 6.5 7.5 9.0 5.8 6.5 9.0 4.7 5.0 9.6 7.2 8.0 9.6 6.4 7.0 9.6 5.3 5.5 7.6 7.8 8.8 7.6 7.2 8.0 7.6 6.4 7.0 Q4 84 to Mar. 85 Q4 84 to June 85 9.5 8.7 9.5 8.3 9.5 7.6 10.7 9.6 10.7 9.2 10.7 8.5 9.3 9.2 9.3 8.9 9.3 8.4 1985--January February March April May June Growth Rates Monthly 1985--January February March April May June Growth Rates 1985--1Q Q2 Chart 1 Actual and Targeted M1 Billi ons of dotI ACTUAL LEVEL -ESTIMATED LEVEL * SHORT RUN ALTERNATIVES -re 1 600 -- -- 590 580 .5- 570 -I 560 -- 550 o" * U 0 O N N 1984 I D D I I F J F I I I I M I A I SI M I M J J J 1985 , A I I I I I I I I D S 0 N D 540 CHART 2 ACTUAL AND TARGETED M2 Bil Iions of dol lars I 2600 S---* 8.5: ACTUAL LEVEL ESTIMATED LEVEL SHORT RUN ALTERNATIVES 2550 6XI 2500 * * 2450 0 e * -' / -- 2400 2350 2300 I I I I I I I I I I I A S SN D J F M A M J J 1984 1985 I 0 I N 2250 CHART 3 ACTUAL AND TARGETED M3 B iions of dollars 1 3300 ACTUAL LEVEL ESTIMATED LEVEL SHORT RUN ALTERNATIVES 3200 3100 .*' .' .**' ,. 3000 2900 2800 0 N 1984 D J F M A M J 1985 J A S 0 N D -7- projected expansion in nominal GNP, reflecting some remaining lagged effects on money demand of earlier interest rate declines. The pattern of M1 growth over the quarter could be affected by the timing of tax refunds. The amount of such refunds to date has lagged considerably behind disbursements in comparable periods during the past two years. Refunds are expected to run 10 percent less in total this year, but payments thus far have been well below that pace. That may have been a marginal factor restraining M1 growth in recent weeks, and as the Treasury catches up could boost growth a bit. (9) The specified growth of M1 for the March-to-June period would imply expansion from QIV to June at an 8-1/4 percent annual rate (assuming growth in March in fact turns out to be at the 3-1/2 percent rate currently estimated). For M1 growth for the year to be just below the upper limit of the FOMC's longer-run range--for example, to be around 6-1/2 percent (OIV to QIV basis)-its growth would have to slow further over the June-to-December period, to about a 3-3/4 percent annual rate. Such a slowing would imply a return to rising velocity on the order of 2 to 2-1/2 percent at an annual rate, given the staff's GNP projectiona velocity rise that suggests the possibility of some little increase in interest rates as the second half progresses. (10) Growth in M2 and M3 is expected to be subdued over the second quarter, reflecting the anticipated slowdown in M1 and relatively moderate expansion in their nontransactions components. Nontransactions components have recently grown quite modestly, and little further change is expected, except for greater CD expansion in the spring to compensate in part for slower growth in core deposits. M2 would move close to the -8upper limit of its long-run cone by June under such conditions, and M3 would be within its cone. (11) Growth in the debt of nonfinancial sectors in the second quarter is projected to remain close to the pace of the first quarter. With expansion at around an 11-1/2 percent annual rate, the increase in nonfinancial debt would continue to outstrip growth in GNP, and for the first half of the year would be just below the 12 percent upper limit of the Committee's monitoring range. We have assumed that equity retire- ments related to mergers and corporate financial restructuring will account for approximately 3/4 of a percentage point of debt growth over the March-to-June period, somewhat less than in the first quarter. Underlying business needs for funds, however, may edge higher as capital expenditures increase moderately while internally generated funds show little change. For households, mortgage borrowing may rise, reflecting the pick-up in expenditures following the decline in mortgage rates late last year, but consumer installment credit should slow somewhat, although remaining quite rapid. Federal government borrowing is projected to increase (after seasonal adjustment), mirroring to some extent swings in its cash balance over the first two quarters rather than a fundamental shift in credit market pressures. (12) The money growth objectives of alternative B are expected to involve continuation of about the existing degree of pressure on reserve positions, with reserve paths based on adjustment plus seasonal borrowing at the discount window averaging around $350 million and federal funds expected to trade around 8-1/2 percent. Seasonal borrowing has averaged around $80 million in recent weeks, and with the spread of the federal funds rate over the discount rate likely to remain fairly -9narrow under this alternative, seasonal borrowing would ordinarily be expected to increase only moderately further over the intermeeting period. If availability of the temporary simplified seasonal borrowing program or liquidity pressures at some agricultural banks were to result in an unusual rise in seasonal borrowing over the intermeeting period, or if adjustment borrowing rose substantially for special reasons, such as the situation in Ohio, such borrowing increases above normal could be treated as in effect "nonborrowed" reserves in the conduct of open market operations. Nonborrowed reserves are anticipated to expand at about a 10 percent annual rate over the next three months, and total reserves by about 9 percent, to meet the money objectives of this alternative and if demands for excess reserves are in the $600 to $700 million range. (13) Interest rates could fall a little on balance over the intermeeting period under this alternative, although some near-term pressures could be evident at month end, owing to statement-date pressures and the process of distributing the Treasury's current end-ofquarter financing that raises about $12-3/4 billion of new cash in coupon issues. The 3-month Treasury bill rate might decline toward 8-1/4 percent, as continued moderate growth in money and discount window borrowing around the $350 million level further allayed concerns about a tightening of monetary policy. Significant downward movements in long-term rates are unlikely in the absence of any substantial progress on deficit reduction measures or a noticeable weakening of economic activity. In general, domestic credit, as well as foreign exchange, markets are likely to remain unusually skittish over the weeks ahead, having been sensitized by recent problems in the government securities market and with thrift institutions. Thus, interest rates and foreign exchange rates may be -10prone to particularly sharp day-to-day movements. In foreign exchange markets the dollar might decline a little further, on balance, if interest rates tend a bit lower or if uncertainties about the strength of the U.S. economy or the stability of financial markets become more prevalent. (14) Alternative A contemplates some easing of pressures on reserve positions, with borrowing dropping to around $200 million and the federal funds rate declining to close to the 8 percent discount rate. Total and nonborrowed reserves might increase at rates of 10 and 13 percent, respectively, over the next three months. Other short-term interest rates might fall sharply under this alternative, with the 3-month Treasury bill rate dropping below 8 percent. The easing of money markets would also tend to relieve the sensitivity of markets to the condition of financial institutions. Bond yields, too, would drop, and in foreign exchange markets, the dollar would fall substantially further. (15) M1 growth would slow relatively little from the December- to-March pace under this alternative and would move above the upper limit of the band. M2 and M3 growth rates are expected to be relatively moder- ate, though M2 is expected to remain above the long-run cone in June under this approach. Moreover, there is potential for quite rapid growth for a while in the broad aggregates, particularly if market rates were to decline abruptly in face of lagging institutional rates. (16) From the fourth quarter to June, M1 would increase at an 8-3/4 percent annual rate under alternative A. Growth would have to slow to about a 3-1/4 percent annual rate over the last six months of the year, if growth for the year (QIV-to-QIV basis) were to be just below the upper limit of the long-run range. This would increase the odds that interest rates will rise in the second half of the year. -11(17) Under alternative C, the 5 percent pace of M1 growth from March to June would keep this aggregate below the upper limit of the band. And the slower growth specified for M2 and M3 would place both of these aggregates within their respective long-run cones in June. Such a deceleration of money growth would likely involve a significant tightening of reserve conditions. Borrowing might increase to around $750 mil- lion, and the federal funds rate would probably rise to around 9-1/2 percent. Nonborrowed and total reserves would increase at 4-1/2 and 7 percent annual rates, respectively. (18) Other short-term interest rates also would rise under this alternative, although the extent of the increase might be damped a bit given existing expectations for some tightening in policy. The Treasury bill rate might rise to around 9 percent or higher, with private rates increasing a little more as the tightening of money markets accentuated concerns about credit quality. relatively small on balance, The rise in bond rates might be as slower money growth and the potential for less robust economic activity lay the groundwork for a possible decline in rates in the second half of the year. The dollar would probably regain some of its recent loss in exchange markets. -12Directive language (19) Proposed language for the operational paragraph is shown below, with alternatives for describing the degree of pressure on reserve positions. The bracketed phrase in the first sentence, which is drawn from the previous directive, seems more appropriate if the Committee opts for alternatives A or B rather than the tightening of alternative C. Also, if the Committee were to adopt something like the proposed language in caps in the body of the paragraph beginning with the phrase "IN EITHER CASE ... ", that might address the issues implicit in the bracketed language. OPERATIONAL PARAGRAPH In the implementation of policy for the immediate future, remaining] taking account of the progress against inflation, [DEL: uncertainties in the business outlook, and the EXCHANGE VALUE in the [DEL: strength] of the dollar [DEL: exchange markets,] the Committee seeks to REDUCE SOMEWHAT (Alt. A)/maintain (Alt. B)/INCREASE SOMEWHAT (Alt. C) THE EXISTING DEGREE OF PRESSURE ON reserve recent of conditions characteristic POSITIONS. [DEL: weeks. Should] THIS ACTION IS EXPECTED TO BE CONSISTENT WITH growth in M1, annual an [DEL: appear to be exceeding M2, rate of around 8 percent and M3 AT ANNUAL RATES[DEL: a rate] of around [DEL: 11] to 10 and] ____, ____, December AND ____percent RESPECTIVELY during the period from[FRL: increasesin mondest March TO JUNE, [DEL: ifbusiness sought, particulary and rate factory exchange market to reserve pressures would be satisa at rising is activity pressures diminish.] SOMEWHAT GREATER RESERVE RESTRAINT WOULD (MIGHT) BE ACCEPTABLE IN THE EVENT OF MORE SUBSTANTIAL GROWTH OF THE MONETARY AGGREGATES WHILE -13on reserve SOMEWHAT lesser restraint [DEL: positions] would (MIGHT) be in the acceptable in the event of substantially slower growth [DEL: monetary aggregates, particularly.] IN EITHER CASE SUCH A CHANGE WOULD BE CONSIDERED ONLY in the context of APPRAISALS OF THE STRENGTH OF THE BUSINESS EXPANSION, PROGRESS AGAINST INFLATION, sluggishgrowth economic in AND CONDITIONS IN DOMESTIC CREDIT AND[DEL: in] dollar the of strenght continued and activity markets. foreign exchange 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 percent. TO ____ 6-to-10]____ funds rate persistently outside a range of [DEL: Selected Interest Rates March 25, 1985 Percent 1983--High Low 10.21 8.42 9.49 7.63 9.64 7.72 9.79 7.82 9.93 8.15 9.85 8.01 8.79 7.71 11.50 10.50 11.57 9.40 12.14 10.18 12.11 10.32 13.42 11.64 10.56 9.21 13.89 12.55 13.50 11.50 n.a. na.. 1984--High Low 11.77 7.95 10.65 7.71 10.76 8.01 11.09 8.39 11.71 8.24 11.35 8.04 10.12 8.38 13.00 11.00 13.44 10.39 13.84 11.30 13.81 11.36 15.30 12.70 11.44 9.86 14.68 13.14 14.00 12.50 12.31 10.81 1984--Jan. Feb. Mar. 9.56 9.59 9.91 8.90 9.09 9.52 9.02 9.18 9.66 9.07 9.23 9.35 9.81 8.80 9.67 9.42 9.54 10.08 8.91 11.00 11.00 11.21 10.93 11.05 11.59 11.67 11.84 12.32 11.75 11.95 12.38 12.99 13.05 13.63 10.03 10.00 10.37 13.37 13.23 13.39 12.50 12.50 12.70 10.99 10.89 11.02 Apr. May June 10.29 10.32 11.06 9.69 9.83 9.87 9.84 10.31 10.51 9.95 10.57 10.93 10.41 11.11 11.34 10.17 10.38 10.82 9.29 9.52 9.92 11.93 12.39 12.60 11.98 12.75 13.18 12.63 13.41 13.56 12.65 13.43 13.44 13.96 14.79 15.00 10.26 10.88 11.07 13.65 13.94 14.42 13.00 13.94 14.00 11.16 11.35 11.67 July Aug. Sept. 11.23 11.64 11.30 10.12 10.47 10.37 10.52 10.61 10.47 10.89 10.71 10.51 11.56 11.47 11.29 11.06 11.19 11.11 10.30 10.58 10.62 13.00 13.00 12.97 13.08 12.50 12.34 13.36 12.72 12.52 13.21 12.54 12.29 14.93 14.12 13.86 10.84 10.40 10.54 14.67 14.47 14.35 14.00 13.70 13.50 12.20 12.14 12.00 Oct. Nov. Dec. 9.99 9.43 8.38 9.74 8.61 8.06 9.87 8.81 8.28 9.93 9.01 8.60 10.38 9.18 8.60 10.05 9.01 8.39 10.16 9.34 8.55 12.58 11.77 11.06 11.85 10.90 10.56 12.16 11.57 11.50 11.98 11.56 11.52 13.52 12.98 12.88 10.77 10.69 10.40 14.13 13.64 13.18 13.38 12.75 12.50 11.96 11.54 11.01 1985--Jan. Feb. 8.35 8.50 7.76 8.27 8.00 8.39 8.33 8.56 8.14 8.69 7.99 8.46 8.00 8 7. 0p 10.61 10.43 10.55 11.38 11.51 11.45 11.47 12.78 12.76 9.96 10.07 13.08 12.92 12.50 12.50 10.84 10.63 2 9 16 23 30 8.75 8.27 8.23 8.19 8.45 7.77 7.78 7.73 7.71 7.73 8.12 8.05 7.99 7.94 7.96 8.47 8.37 8.36 8.28 8.25 8.31 8.12 8.08 8.12 8.16 8.04 7.95 7.89 7.99 8.31 8.21 8.04 7.93 7.85 10.68 10.50 10.51 10.52 10.54 10.35 10.25 11.54 11.54 11.53 11.34 11.09 11.55 11.57 11.60 11.45 11.19 12.96 12.92 12.82 12.51 12.59 10.31 10.11 9.95 9.60 9.81 13.10 13.12 13.12 12.96 12.93 12.50 12.50 12.50 12.50 12.50 10.87 10.84 10.82 10.80 10.62 6 13 20 27 8.59 8.44 8.57 8.40 8.14 8.21 8.20 8.40 8.25 8.30 8.44 8.34 8.64 8.65 8.86 8.42 8.29 8.57 8.46 8.49 8.46 8.71 8.49 7.79 7.78 7.83 7.81 10.50 10.50 10.50 10.50 10.42 10.43 10.39 10.76 11.30 11.40 11.39 11.75 11.31 11.31 11.37 11.71 12.68 12.60 12.95 13.18 9.96 9.98 10.09 10.24 12.91 12.90 12.94 13.02 12.50 12.50 12.50 12.50 10.64 10.59 10.69 10.83 6 13 20 27 8.63 8.52 8.75 8.65 8.60 8.54 8.92 8.92 9.03 9.04 9.05 9.21 9.12 9.06 9.13 8.74 7.82 8.73 8.83 7.91 7.99 10.50 10.50 10.50 11.08 11.03 11.19 11.90 11.81 11.95 11.87 11.78 11.89 13.14 13.23 13.21 10.25 10.25 10.24 13.10 13.20 13.34 12.50 12.50 12.50 10.68 10.87 11.07 15 21 22 8.81 8.60 3 8.6 p 8.41 8.44 8.51 8.98 8.84 8.90 9.18 9.03 9.08 9.24 8.88 8.90 8.94 8.78 8.77 --- 10.50 10.50 10.50 11.17 11.02 11.05p 11.93 11.82 11.88p 11.86 11.77 8 3 11. p 1985--Jan. Feb. Mar. Daily--Mar. 9.20 8.19 8.48 8.72 NOTE Weekly data for columns 1 through 11 are statement week averages Data In column 7 are taken from Donoghue's Money Fund Report Columns 12 end 13 are 1-day quotes for Friday and Thursday, respectively. following the end of the statement week Column 13 Is the Bond Buyer revenue Index Column 14 s an average of contract Interest rates on new commitments for conventional first mortgages with 80 percent loan-to-value 10.50 10.75 10.75 10.50 ratios at a sample of savings and loan associations on the Friday following the end of the statement week After November 30, 1983, column 15 refers only to VA guaranteed loans Column 16 is the average initial contract rate on new Lommitments for one-year ARHs at those institutions offering both fixed- and adjustable-rate mortgages with the same number of discount points. FR1367(4/84) Security Dealer Positions Millions of dollars 1 Period Net Total Tresuy bills Cash Positions TreasY coupons under 1 year over 1 year federal agency private shor-term March 25, 1985 Treasury bills Forward and Futures Positions I Treasuy coupon* under 1 yewr over 1 year edral agency private short-term 1,516 -907 -8,001 -4.411 -9,564 1983--Nigh Low 20,858 -296 13,273 -3,461 1,579 -687 8,778 -3,148 12,088 4.013 17.005 8,839 1,654 -11.307 14 -95 1984--High Low 32,155 5,107 15,653 -8,251 1,296 -1,038 6,854 -5,664 19,525 11,086 21,046 11,263 8,272 -14.456 131 -327 3,381 -986 -7,223 -10,679 -4 -13,053 1984--Jan. Feb. Nar. 12,472 9,287 15.936 10,815 9,658 4,619 1,083 949 811 667 -1.547 -2,626 11,398 12,532 16,151 12,788 13,349 12,764 -10,846 -8.774 -1,026 -15 -38 -10 -116 23 1,042 -7,474 -8,192 -9,552 -5.829 -8,673 -6,236 Apr. May June 14,400 14.163 16,483 2,929 -7,105 -2,631 -32 -291 -596 -1,643 -1,754 -3,248 16,649 16,849 15.999 13,065 12,525 14,457 -2,140 5,511 2,207 -13 -10 -21 476 347 1,448 -9,422 -9,676 -9,937 -5,462 -2,233 -1,195 July Aug. Sept. 12,355 11,499 17,976 -2,382 4,542 10,316 -604 -89 310 -3,391 -1,184 623 16,040 16,098 14.063 14,751 15,556 17,695 -2,528 -7,312 -9,771 -89 -240 -122 2,800 2,504 2,156 -9,650 -9,073 -8.334 -2,592 -9,304 -8,960 Oct. Nov. Dec. 21,955 19,123 26,261 11,649 9,772 13.871 116 -487 -416 2.649 5,087 4,765 13,168 16,106 18,471 16,285 17,950 19,178 -9,867 -8,549 -11,718 -72 -76 59 2,154 539 -389 -8,815 -9,229 -8,304 -5.312 -11.991 -9,256 24,043 32,931* 11,629 12.441* -111 851* 2,484 204* 19,429 19,606* 19,970 19,438* -13.314 -3,638* 31 -10* 703 2,500* -7,046 -8,165* -9.669 -10,295* 1985--Jan. Fe b. -3,270 1984--Dec. 19 26 24,461 32,155 13,585 15,653 -419 -662 3,592 6,854 18,438 18,619 18,580 21,064 -12,273 -14,456 -10 18 -203 -709 -8,308 -7,737 -8.522 -6,487 1985--Jan. Z 9 16 23 30 34,737 31,204 19,289 19,580 23,780 13,896 12,927 9,597 11,245 12,526 -253 -192 -391 -6 100 6,479 6,063 2.593 427 524 19,166 19,139 18.289 18,886 20,934 21,423 21,623 19,233 18,349 19,960 -12,671 -13.049 -14,946 -13,635 -12,507 3 -53 -39 -12 -28 -33 -373 295 1,898 -7,699 -7,774 -7,618 -6,348 -6,219 -5.574 -7,108 -7,725 -10,451 -13,409 6 13 20 27 23,453 24.432 31,038 45,027* 12,201 10,506 12,771 13,495* 357 713 851 1.132* -787 32 218 996* 21,007 20,007 18,846 18,803* 21,649 19,624 19,523 18,434* -9.562 -6.835 -3,049 15.68* -18 -27 -11 -I* 1,856 2,953 2,225 2,644* -7,683 -8,169 -8,243 -8,255* -14,566 -14.372 -12,094 -3.790* 6 13 20 53,395* 51,824* 44,961* 14,297* 14,672* 13,797* 2.119* 1,750* 1,155* -1,789* -4,970* -6,687* 20,157* 20,366* 19,361* 18,483* 16,182* 14,585* 3,809* 2,769* 2,127* 19 -6* 3,647* 4.405* -8,818* -8.750* -8,311* Feb. Mar. NOTE: Govemrent securities dealer cash positions consist of securities already delivered, commitments to buy (ll) securities on an outright basis for immediate delivery (5 business days or less). and certain "whenilaued" securities for delayed delivery (more thn 5 business days). Futures and forward positions liclude all other commitments involving delayed delivery; lutures contracts are arrang. ed on organized exchanges. 1. Cash plus forward plus futures positions in Treasury, federal agency, and privale short-term securities. Strictly confidential 1,126 1.471* 5,406* 4.310* STRICTLY CONFIDENTIAL (FR) CLASS II-FOMC Net Changes in System Holdings of Securities1 Millions of dollars, not seasonally adjusted March 25, 1985 Treasury bills net2 change Period 1980 1981 1982 1983 1984 Treasury coupons net purchases 5-10 -3,052 5,337 5,698 13,068 3,779 2,138 1,702 1,794 1,896 1,938 1983--QTR. III IV 4,617 4,738 1984--QTR. I II III IV -1,168 491 -424 4,880 1984--Sept. 3,178 Oct. Nov. Dec. -2,993 4,463 3,410 Federal agencies net purchases over 10 total 11l 179 107 183 41 4,564 2,768 2,803 3,653 3,440 481 820 24 .51 808 !77 1,130 64 within 1-year I 1-5 over 10 5-10 Net change outright 4 total 668 494 975 1,474 5,439 6,120 9,412 -10,739 -300 1,484 -600 1,657 -1,555 1,918 169 6,432 -286 70 1,982 -316 - - 1,475 182 -- - -100 164 -- -100 total? 2,462 684 1,461 -5,445 1,450 -600 335 Net RPs s 2,035 8,491 8,312 16,342 6,964 217 133 - -4,268 2,362 1985--Jan. Feb. 1-5 within 1-year 3 -- -- -- -17 3,777 -2,312 -3,007 5,848 3,591 -3,805 3,612 -123 -4,368 2,345 -2,315 3,095 1984--Dec. 19 26 371 234 112 -- -- - 112 482 234 351 2,059 1985--Jan. 2 9 16 23 30 285 70 - -- -- 70 355 -931 -2,158 -630 -931 -2,258 -630 4,791 -5,865 3,528 -5,120 18 Feb. 6 13 20 27 -584 -374 341 2,128 -584 -392 341 2,128 727 2,464 383 -5,003 Mar. 6 13 20 801 -1,054 2,227 -1,054 2,507 974 -1,287 LEVEL--Mar. 21 69.3 - -100 - -- -100 1,426 37.3 14.5 20.7 89.5 2.6 4.2 1.3 .4 170.3 5 In addition to the net purchases of securities, also reflects changes in System holdings of bankers' 1 Change from end-of period to end of period. acceptances, direct Treasury borrowing from the System and redemptions (-) of agency and Trea 2 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 shifts.
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