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Prefatory Note The attached document represents the most complete and accurate version available based on original copies culled from the files of the FOMC Secretariat at the Board of Governors of the Federal Reserve System. This electronic document was created through a comprehensive digitization process which included identifying the bestpreserved paper copies, scanning those copies, 1 and then making the scanned versions text-searchable. 2 Though a stringent quality assurance process was employed, some imperfections may remain. Please note that this document may contain occasional gaps in the text. These gaps are the result of a redaction process that removed information obtained on a confidential basis. All redacted passages are exempt from disclosure under applicable provisions of the Freedom of Information Act. 1 In some cases, original copies needed to be photocopied before being scanned into electronic format. All scanned images were deskewed (to remove the effects of printer- and scanner-introduced tilting) and lightly cleaned (to remove dark spots caused by staple holes, hole punches, and other blemishes caused after initial printing). 2 A two-step process was used. An advanced optimal character recognition computer program (OCR) first created electronic text from the document image. Where the OCR results were inconclusive, staff checked and corrected the text as necessary. Please note that the numbers and text in charts and tables were not reliably recognized by the OCR process and were not checked or corrected by staff. CONFIDENTIAL (FR) CLASS III - FOMC March 22, 1991 SUPPLEMENT CURRENT ECONOMIC AND FINANCIAL CONDITIONS Prepared for the Federal Open Market Committee By the Staff Board of Governors of the Federal Reserve System TABLE OF CONTENTS Page THE DOMESTIC NONFINANCIAL ECONOMY Charts Unemployment insurance ................... THE FINANCIAL ECONOMY Tables Mortgage-backed security issuance (revised) . . . Monetary aggregates . . . . . . . . . . . . . . . Commercial bank credit and short- and . . . . . . . intermediate-term business credit Selected financial market quotations . . . . . . . . .. . . . . . . . . . . . . . . . . . Unemployment Insurance (Weekly data; seasonally adjusted, FRB basis <1>) Initial Claims Thousands Mas 9 521.7 S700 600 550 All regular programs 500 450 400 350 300 191 1981 1 1983 1984 1985 198 1987 1988 1982 1983 1984 1985 1986 1987 1988 11989 10 1989 1990 Insured Unemployment 250 1. 1991 Millions 5.0 4.5 4.0 All regular programs Mar 2 3.4 3.5 3.0 2.5 2.0 S 1981 1982 1983 1984 1985 <1> Only the state program components of these series are seasonally adjusted. 1986 1987 1988 1989 1990 1991 1.5 MORTGAGE-BACKED SECURITY ISSUANCE (Monthly averages, billions of dollars, NSA unless noted) Federally related pass-through securities Total Fixed- ARMbacked (SA) Rate Total Multiclass securities Private FNMA FHLMC issues REMICs REMICS Agency strips 1989 1990 r 16.5 19.7 14.1 17.3 2.6 2.3 8.1 11.3 1.4 2.2 3.1 5.0 3.2 3.4 .3 .5 1989-Q4 19.8 19.4 2.2 10.7 1.2 5.2 4.0 .4 1990-Q1 Q2 Q3 Q4 r 21.5 19.9 18.2 19.0 18.5 16.3 17.6 16.6 1.4 2.2 1.6 4.1 11.3 11.1 12.1 10.9 1.6 2.9 2.7 2.2 5.0 4.7 6.6 3.9 3.8 3.0 2.3 4.5 .9 .4 .6 .3 1990-June July Aug. Sep. Oct. Nov. r Dec. r 19.1 16.5 20.1 18.0 18.4 18.7 19.9 17.3 16.2 19.1 17.3 16.7 17.8 15.5 2.2 .5 1.6 2.8 2.5 2.6 7.1 11.5 11.0 11.8 13.6 14.2 8.4 10.1 1.8 1.5 3.6 3.1 2.2 2.3 2.2 4.7 6.7 4.4 8.6 5.6 3.8 2.4 3.8 2.8 2.4 1.6 5.7 2.1 5.5 1.3 .0 1.4 .3 .6 .2 .0 1991-Jan. p Feb. p 15.7 n.a. 13.0 n.a. .7 n.a. 1.1 1.2 2.4 3.2 1.2 n.a. 4.9 n.a. 1. Excludes pass-through securities with senior/subordinated structures. r--revised p--preliminary n.a.--not available. .2 .2 -3MONETARY AGGREGATES (based on seasonally adjusted data unless otherwise noted) 1990 Q3 1990' 1990 Q4 1990 Dec 1991 Jan 1991 Feb p Growth Q4 90Feb 9 1p ------------ Percent change at annual rates-------------------M1 M2 M3 1. 2. 3. 4.2 3.9 1.7 ----------- 3.7 3.0 1.6 3.1 1.7 0.7 3.4 2.2 1.1 Percent change at annual 1.9 1.0 3.3 14.1 8.6 10.6 6.4 3.6 4.8 rates------------ Levels bil. $ Feb 91p Selected components 4. hM-A 5. 6. 4.6 Currency Demand deposits 7. Other checkable deposits 8. 2 M2 minus Ml 3.5 6.9 -1.3 25.3 -17.3 16.7 14.5 255.1 276.2 0.7 3.7 0.8 11.8 296.8 1.2 0.8 6.8 -20.8 -58.7 -39.0 -6.7 71.1 11.2 7.8 4.1 11.5 -7.6 -7.4 -7.9 16.4 11.0 4.4 17.3 -12.8 -11.6 -13.6 29.7 5.0 2.9 7.2 -7.7 -3.5 -10.2 14.1 11.6 14.9 8.2 -3.7 8.9 -11.3 360.5 1192.0 586.3 605.7 897.3 340.5 556.8 -3.9 -3.6 -3.7 13.0 19.1 803.6 -8.9 -2.2 -27.3 -13.0 -8.5 -26.3 -12.9 -39.3 10.7 23.9 -30.7 8.2 19.8 -31.6 515.0 400.2 114.8 21.6 1.6 12.2 30.4 -25.9 15.4 51.8 -69.0 3.4 42.0 -22.6 -5.2 84.9 -20.3 31.1 139.3 87.0 71-3 billions of dollars--- 11.4 9.9 7.5 12.4 -5.4 -2.2 -7.2 Large time deposits At commercial banks, net5 At thrift institutions Institution-only money market mutual fund shares Term RPs, NSA Term Eurodollars, NSA -0.3 539.5 5.4 market mutual fund shares 4 11.1 -0.7 14.9 3.0 Commercial banks 3 Savings deposits plus IMDAs Small time deposits .. M3 minus M2 11.2 1.3 2.7 1.8 11. 12. 13. 3 2.7 2.7 Overnight RPs and Eurodollars, NSA General purpose and broker/dealer money Savings deposits plus MMDAs Small time deposits 4.9 3.8 9. 10. Thrift institutions 6.0 9.9 11.4 7.4 15.5 -6.8 -4.9 -11.1 -6.4 -9.5 -3.6 -23.9 20.2 -12.0 -12.5 ----- Average monthly change MEMORANDA: 26. 27. in 6 24. Managed liabilities at commercial banks (25+26) 25. -4.3 Large time deposits, gross Nondeposit funds Net due to related foreign institutions 7 Other 28. 29. U.S. government deposits at commercial 8 banks 2521.0 -0.2 -2.6 2.4 0.9 -2.6 3.6 -2.5 -3.9 1.5 -8.1 -3.4 -4.7 -1.5 9.1 -10.6 -2.3 9.4 -11.7 715.4 450.3 265.1 2.2 0.2 1.4 2.1 4.4 -2.8 4.5 -9.2 -1.2 -9.5 -8.8 -2.9 24.6 240.5 0.3 1.8 -0.5 -0.8 1.4 7.6 33.4 1. Amounts shown are from fourth quarter to fourth quarter. 2. Nontransactions M2 is seasonally adjusted as a whole. 3. 4. 5. 8. p Commercial bank savings deposits excluding MMDAs grew during January and February at rates of 12 percent and 11.3 percent, respectively. At thrift institutions, savings deposits excluding MMDAs grew during January and February at rates of -4.5 percent and 9.1 percent, respectively. The non-M2 component of M3 is seasonally adjusted as a whole. Net of large denomination time deposits held by money market mutual funds and thrift institutions. Dollar amounts shown under memoranda are calculated on an end-month-of-quarter basis. onsists of borrowing from other than commercial banks in the form of federal funds purchased, securities sold under agreements to repurchase, and other liabilities for borrowed money (including borrowing from the Federal Reserve and unaffiliated foreign banks, loan RPs and other minor items). Data are partially estimated. Consists of Treasury demand deposits and note balances at commercial banks. - preliminary COMMERCIAL BANK CREDIT AND SHORT- AND INTERMEDIATE-TERM (Percentage changes at annual rates, based on seasonally adjusted data) 1989:Dec. to 1990:Dec. Q3 -------------- --------- 1. 2. Total loans and securities at banks Securities 1990 Q4 1991 Dec. Jan. --- Feb. Levels bil. $ Feb. Commercial Bank Credit -- ------------------- 5.3 5.7 2.3 3.1 8.6 8.4 .5 -. 4 -1.0 4.2 6.3 2735.1 7.4 635.5 10.3 458.0 .0 177.6 3. U.S. government securities 13.9 1.0.6 3.7 .5 4. Other securities -3.1 2.7 -7.2 -2.0 4.3 4.9 2.9 4.1 -2.5 6.0 2099.5 -5.7 .4 643.9 6.9 842.6 5.7 377.7 .0 43.2 21.0 192.3 5. Total loans 6. Business loans 1.9 1.2 3.1 4.1 7. Real estate loans 9.5 7.5 6.1 5.6 8. Consumer loans 1.3 1.3 .6 1.3 9. Security loans 4.1 2.0 -6.8 30.3 -1.8 Sh 3.6 -4.6 -. 6 10. Other loans -. 3 15.1 .0 -8.9 76.8 -6.3 sho>rt- and Intermediate-Term Business Credit ---------Business loans net of bankers acceptances 2 12. Loans at foreign branches 13. Sum of lines 11 & 12 14. Commercial paper issued by nonfinancial firms 15. Sum of lines 13 & 14 16. Bankers acceptances: related ' 17. 1.9 1.5 3.2 4.0 -5.3 2.1 637.8 19.3 36.7 37.0 38.1 13.8 -13.7 26.0 2.5 2.6 4.4 5.4 -4.3 1.3 663.8 16.8 -3.2 -4.0 3.2 -15.1 149.0 5.2 3.0 -27.2 17.8 3.9 3.5 3.4 -2.7 20.7 8.0 8.8 13.2 n.a. 293.25 8.0 4.6 4.9 1.3 n.a. L140.05 12.2 4.2 3.5 -3.1 .0 3.6 -1.6 812.8 U.S. trade -9.6 Line 15 plus bankers acceptances: U.S. trade related 1 18. Finance company loans to business 19. Total short- and intermediateterm business credit (sum of lines 17 & 18) 3.6 12.7 5.8 -7.3 -2.0 32.8 845.6 1. Average of Wednesdays. 2. Loans at foreign branches are loans made to U.S. firms by foreign branches of domestically chartered banks. 3. Based on average of data for current and preceding ends of month. 4. Consists of acceptances that finance U.S. imports, U.S. exports, and domestic shipment and storage of goods. 5. January data. p--preliminary. 7.a.--not available -51 SELECTED FINANCIAL MARKET QUOTATIONS (percent) -----------------------------------------------------------------------------------------------------1989 1990 1991 Change from: Dec lows March highs Aug highs FOMC Feb 6 Mar 21 Aug 90 FOMC highs Feb 6 Short-term rates Federal funds 2 9.85 8.45 8.21 6.89 6.13 -2.08 -0.76 Treasury bills 3-month 6-month 1-year 9.09 9.11 9.05 7.53 7.29 7.11 7.59 7.51 7.45 5.91 5.88 5.86 5.87 5.87 5.99 -1.72 -1.64 -1.46 -0.04 -0.01 0.13 10.05 10.15 8.51 8.22 8.10 8.05 6.42 6,41 6.37 6.32 -1.73 -1.73 -0.05 -0.09 10.07 10.32 10.08 8.52 8.22 8.01 8.14 8.18 8.25 6.40 6.45 6.45 6.36 6,33 6.44 -1.78 -1.85 -1.81 -0.04 10.19 10.50 8.38 8.25 8.13 8.19 6.38 6.50 6.38 6.38 -1.75 -1.81 0.00 -0.12 11.50 10.50 10.00 9.00 9.00 -1.00 0.00 U.S. Treasury (constant maturity) 3-year 7.69 9.88 10-year 9.53 7.77 30-year 7.83 9.31 8.50 9.05 9.17 6.99 7.79 8.02 7.40 8.16 8.34 -1.10 -0.89 -0.83 0.41 0.37 0.32 Municipal revenue(Bond Buyer) Commercial paper 1-month 3-month Large negotiable CDs 1-month 3-month 6-month Eurodollar deposits 1-month 3-month 3 -0.12 -0.01 4 Bank prime rate Intermediate- and long-term rates 7.95 7.28 7.80 7.24 7.33 -0.47 0.09 Corporate--A utility recently offered 10.47 9.29 10.50 9.61 9.66 -0.84 0.05 Home mortgage rates 6 S&L fixed-rate S&L ARM, 1-yr. 11.22 9.31 9.69 8.34 10.29 8.39 9.56 7.75 9.50 7.45 -0.79 -0.94 -0.06 -0.30 1989 Record highs Date Lows Jan 3 1991 FOMC Feb 6 Mar 21 Percent change from: Record highs 1989 lows FOMC Feb 6 Stock prices Dow-Jones Industrial 2999.75 NYSE Composite 205.74 AMEX Composite 397.03 NASDAQ (OTC) 485.73 3582.30 Wilshire 7/16/90 2144.64 2830.94 2855.45 3/5/91 154.00 195.38 200.79 10/10/89 305.24 332.73 353.15 10/9/89 378.56 439.24 464.60 3/5/91 2718.59 3390.97 3497.00 One-day quotes except as noted. Average for two-week reserve maintenance period closest to date shown. Last observation is average for the maintenance period ending March 20, 1991. -4.81 -2.41 -11.05 -4.35 -2.38 33.14 30.38 15.70 22.73 28.63 0.87 2.77 6.14 5.77 3.13 3/ Secondary market. 4/ Bid rates for Eurodollar deposits at 11 a.m. London time. 5/ Based on one-day Thursday quotes and futures market index changes. 6/ Quotes for week ending Friday closest to date shown.