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March 26, 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) March 26, 1982 CLASS I - FOMC MONETARY POLICY ALTERNATIVES Recent developments (1) After growing rapidly over the three months November through January, M1 contracted in February at a 3¾ percent annual rate, and now appears to have grown only about 2 percent in March. Thus, over the last two months behavior of this aggregate has been close to the zero growth objective for that period specified by the Committee at its February meeting. Demand deposits contracted sharply over the past two months--more than offsetting their December-January bulge in growth. However, other checkable deposits (OCDs) continued to expand at a relatively rapid, though decelerating, pace during the period. (2) The recent performance of M1 has brought it closer to, but still above, the upper limit of the Committee's longer-run range. As shown in the next-to-last column of the table on the next page, growth of Ml from QIV '81 to March '82 is estimated at about a 7¾ percent annual rate; however, growth on a quarterly average basis for the first three months of the year was at a more substantial 10¼ percent annual rate. (3) Growth of M2 thus far this year has been just above its longer-run target range, with expansion since QIV '81 at a 9¼ percent annual rate. Over the two-month February-March period, M2 appears to have grown at about a 7 percent annual rate, a bit below the 8 percent rate targeted by the Committee. Growth in money market funds, though picking up recently, has been somewhat slower than anticipated as interest rate spreads for a time were unfavorable. Savings deposits, which had expanded rapidly since October, grew slightly over the past two months, while small time deposits resumed a more rapid rate of expansion. -2KEY MONETARY POLICY AGGREGATES (Seasonally adjusted, annual rates of growth) 1982 Jan. Feb. Mar._ Jan. to Mar. M1 21.0 -3.7 2.1 -0.8 M2 12.2 (9.4) 4.3 (6.9) 9.9 (12.3) 7.1 (9.7) 9.2 (9.7) 9.6 (9.3) 8.8 5.8 10.6 8.2 8.7 8.6 10.5 11.4 n.a. n.a. n.a. 1 QIV '81 to Mar.'82 1 QIV '81 to QI '821 Money and Credit Aggregates (Nontransaction component) M3 Bank Credit 2 n.a. 7.8 10.3 Dec. '81 to Mar. '82 Reserve Measures Nonborrowed reserves 4 -2.5 -17.5 12.7 -2.5 -2.5 0.2 Total reserves 22.2 -10.0 3.6 -3.2 5.2 8.2 Monetary base 11.6 3.4 4.2 3.8 6.4 8.0 1321 418 1558 307 1265 326 - -- -- Memo: (Millions of dollars) Adjustment borrowing Excess reserves n.a.--not available. 1. March estimated on the basis of partial data. 2. Adjusted for shifts of assets from U.S. offices to IBFs. 3. Growth rates for reserves measures are adjusted to remove the effects of discontinuities resulting from phased changes in reserve ratios under the Monetary Control Act. 4. Nonborrowed reserves include special borrowing and other extended credit from the Federal Reserve. (4) Expansion of bank credit continued at around an 11 percent annual rate in January and February (adjusted for shifts of assets to IBFs), paced by strength in business loans. Bank credit growth seems to have slowed in March, along with a weakening in demand for business loans, insofar as can be judged from weekly large bank data for the first half of March. in March. Issuance of commercial paper has remained strong thus far Business financing obtained from long-term sources receded to unusually low levels in the first two months of the year, but the pace has picked up somewhat in March as long-term rates edged off from peaks reached in early February. (5) In conjunction with its decision to seek no M1 growth in February and March the Committee specified an initial level of adjustment borrowing of $1.5 billion, implying a considerable reduction in nonborrowed reserves in February. Owing to the weaker-than-targeted money growth early in the intermeeting period, the level of adjustment borrowing implied by the reserves path gradually declined, but most recently the pick-up of required reserves associated with the strengthening of M1 has contributed to a higher level of adjustment borrowing and moderate 1/ growth in total reserves.- For the intermeeting period, adjustment borrowing averaged about $1.4 billion. Since the beginning of the year, all of the total reserves growth of about 5¼ percent, at an annual rate, has reflected expansion in borrowed reserves. Nonborrowed reserves, despite a substantial rise in March, have declined somewhat on balance since December. 1/ Reserve paths and adjustments made since the last Committee meetings are shown in Appendix I. (6) The federal funds rate has fluctuated generally in a 13 1/2 to 15 1/2 percent range over the intermeeting period. recent statement week, funds averaged 14 1/2 percent. In the most Other short-term interest rates, too, have been volatile over the intermeeting period, reflecting market participants' changing perceptions of the outlook for money growth and reserve market conditions. rates have declined on balance Most short-term market to 1 point since the February FOMC meeting, and long-term interest rates are down 1/2 to 3/4 of a point. (7) FOMC meeting. The dollar has risen by about 4 percent since the last While daily movements of the dollar often have been related to movements in U.S. short-term interest rates relative to foreign rates, at the end of the period interest differentials were about the same as at the beginning. The dollar benefited from relatively favorable price developments and from a general perception that governments abroad may be shifting to less restrictive demand policies. Alternative near-term targets (8) Shown below are alternative targets, and associated federal funds rate ranges, for M1 and M2 for the second quarter. (More detailed and longer-run data for the alternatives are contained in the table and charts on the following pages, and the quarterly interest rate pattern underlying the staff's GNP projection for 1982 is contained in appendix II.) Alternative A, calling for a 4½ percent rate of growth of M1 in the March-to-June interval, would, as shown in Chart 1, maintain the level of narrow money above the upper end of the Committee's 2½-to-5½ percent longer-run range throughout the second quarter; however, that rate, if sustained over the second half, would bring M1 down to the upper end of range by year-end. The 3 percent M1 rate of growth from March to June of alternative B is designed to bring the level of that aggregate to about the upper limit of the Committee's longer-run range by around mid-year. The alternative C specification of 1½ percent M1 growth would place that aggregate at about the middle of the upper half of the range by mid-year. Under all three alternatives, M2 would be expected to move within the 1/ upper half of its longer-run range.- / The new 91-day deposit instrument authorized by the DIDC, to be effective May 1, is unlikely to significantly strengthen time deposit growth, but--reflecting the temporary ceiling rate differential--is likely to add to thrift deposit expansion relative to that for commercial banks. Similarly, the new unregulated 3 year deposit is not expected to add to time deposit growth since about half of the depository institutions have been offering less than the ceiling rate on the 2 year and over SSC. -6Alt. A Alt. B Alt. C M1 4½ 3 1½ M2 8¼ 7½ 6¾ Federal funds rate range 11 to 15 12 to 16 13 to 17 Growth from March to June (9) Despite the staff's projection of second-quarter growth in nominal GNP at a 9 percent annual rate, money demand is not expected to strengthen significantly in the March to June period. M1 growth in the first quarter was considerably in excess of what might be expected on the basis of actual income and interest rates, and apparently reflected the public's increased demand for liquidity in an environment of economic uncertainty. This demand was reflected in part in a resurgence in growth of the OCD component of M1. Resumption of economic growth is likely to reduce uncertainty, with the public in consequence readjusting its financial asset holdings by drawing on its accumulated money and liquidity balances for spending and/or investing in other financial assets. Such behavior would lead to a sharp rise in velocity of the existing money stock and permit expanding nominal GNP to be financed with relatively little additional M1. The projected adjustment in money holdings and liquidity balances is expected to take the form of a further deceleration in growth of OCD--in the April-June period to a rate of close to 15 percent per annum, as compared with growth at about a 50 percent annual rate in the November-February period and at more than a 20 percent annual rate in March. (10) In setting a path for second-quarter growth in the money supply, we have allowed for most, and possibly all, of M1 expansion to occur in April. Growth of M1 in April (seasonally adjusted) accelerated over the last half of the 1970s. In the past two years, however, M1 has been Alternative Levels and Growth Rates for Key Monetary Aggregates __ Alt 1982--January February March April May June A Alt B Alt C Alt. A Alt. B Alt. C Alt. A Alt. B Alt. C 448.6 447.2 448.0 448.6 447.2 448.0 1840.9 1847.5 1862.8 1840.9 1847.5 1862.8 1840.9 1847.5 1862.8 2203.9 2214.6 2234.2 2203.9 2214.6 2234.2 2203.9 2214.6 2234.2 453.0 451.4 451.4 451.4 451.0 450.2 449.7 1877.6 1889.4 1901.3 1876.7 1887,3 1897.9 1875.7 1885.0 1894.5 2251.8 2269.6 2287.6 2250.9 2267.5 2284.2 2249.9 2265.2 2281.0 21.0 -3.7 2.1 21.0 -3.7 2.1 21.0 -3.7 2.1 12.2 4.3 9.9 12.2 4.3 9.9 12.2 4.3 9.9 8.8 5.8 10.6 8.8 5.8 10.6 8.8 5.8 10.6 9.9 1.6 1.9 9.1 0.0 0.0 8.0 -2.1 -1.3 9.5 7.5 7.6 9.0 6.8 6.7 8.3 5.9 6.2 9.4 9.5 9.5 9.0 8.8 8.8 8.4 8.2 8.4 4.5 3.0 1.5 8.3 7.5 6.8 9.6 9.0 8.4 10.3 3.9 10.3 3.1 10.3 2.1 8.6 9.0 8.6 8.6 448.6 447.2 448.0 451.7 452.3 Growth Rates Monthly 1982--January February March April May June March '82 - June '82 Growth Rates Quarterly 1982--QI QI' Chart 1 CONFIDENTIAL (FR) Class - FOMC Actual and Targeted M1 M1 - Billions of dollars 480 ACTUAL LEVEL 1 S* SHORT-RUN ALTERNATIVES -1 470 - 440 -- 430 - 420 5'/2% 4% 2'%% I 0 I N 1981 1 I I D March level is projected. J F I M I I I A M J I J 1982 I A I S I 0 I N D Chart 2 CONFIDENTIAL (FR) Class II Actual and Targeted M2 and M3 M2 FOMC Billions of dollars 2000 ACTUAL LEVEL 1 * * SHORT-RUN ALTERNATIVES 9% -0 - % -- 1900 -11850 .- f2 - I O O 1 I I N 1981 D N 19G1 D J I F I M I A I M I I J I I I I March level is projected. F M A M J 1982 1800 1750 J A S O N D J A S O N D 1982 J 1950 quite volatile in April--declining sharply in 1980, presumably reflecting the credit control program, and rising very rapidly in 1981, partly reflecting the preceding policy-induced drop of short-term interest rates. With so volatile a performance of M1 in the most recent years, it is difficult to judge whether the pre-1980 trend has continued and thus whether it should be reflected in current seasonal adjustment factors. Under the circumstances, we have assumed that the odds are tilted toward the computed April seasonal factor this year having underestimated the seasonal increase. But uncertainties with respect to April are great, not only because of the special factors noted above, but also because there are always questions about how rapidly individuals will pay their taxes, how they will manage their cash in doing so, how quickly the Treasury will pay refunds, and how promptly they will collect the checks mailed in. Thus, while we have allowed for a bulge in growth in April, a relatively moderate growth cannot be ruled out, particularly if tax payments are made out of NOW accounts that were built up earlier or out of money market funds (thereby avoiding a temporary build-up in demand deposits). (11) Alternative A, which entails growth of M1 at a 4½ percent rate from March to June, would call for an increase in total reserves over the quarter at about an 8½ percent annual rate. Assuming a decline in adjustment borrowing to about $750 million, nonborrowed reserves would expand at a 13½ percent annual rate over the quarter. A federal funds rate of 13 percent or so would be implied, given the present discount rate. (12) The 3-month bill rate under this alternative may decline into the 11 to 12 percent area. Bond yields, too, would be likely to -9decline, although the rally might be limited by a pick-up in corporate bond offerings. Pressures on thrift institutions would ease a bit, but operating losses still would continue for most institutions, especially given the lag between declines in market rates and average deposit costs. With U.S. interest rates falling, there is likely to be some tendency for the foreign exchange value of the dollar to decline from recent advanced levels, though any such weakening would be limited if foreign monetary authorities took the opportunity to permit their interest rates to decrease further. (13) The alternative B specifications, which call for M1 growth at a 3 percent rate from March to June, imply an increase in total reserves at a 7 percent rate. Assuming adjustment borrowing of $1¼ billion, nonborrowed reserves would also increase at around a 7 percent rate, and the federal funds rate would likely fluctuate around 14 percent or a bit higher. Other interest rates would probably continue to fluctuate within the range of the past several weeks, absent any substantial change in the fiscal outlook. In addition, to the extent that the market has discounted a considerable bulge in money growth in April, market rates could decline somewhat if such a bulge does not develop. (14) Alternative C, involving a 1½ percent rate of growth of M1 over the March-to-June period, would require a growth in total reserves at a 5½ percent rate. This alternative would appear to be consistent with adjustment borrowing of near $1¾ billion, implying essentially no growth in nonborrowed reserves. Under this approach, the federal funds rate would likely rise into the 15 to 16 percent range over the inter- meeting period. Such a rebound in the funds rate would probably lead to a substantial rise in other short-term rates and renewed upward -10pressure on long rates. These rate pressures might be moderated to the extent that market expectations about the vigor of economic recovery and future credit demands are dampened. The dollar would come under substantial upward pressure in exchange markets. (15) In considering the proposed alternatives for the second quarter, the Committee may also want to take account of implications for the second half of the year. If the M1 specification of alternative A is adopted for the second quarter, this would imply a further deceleration of M1 growth over the last six months of the year to a 2¾ percent annual rate to be consistent with growth for the year (QIV to QIV basis) at 4¾ percent rate, the middle of the upper half of the FOMC's M1 range for the year (see the top line of the "4¾" column in the table below.) The last column of the table shows that growth at about a 4 percent annual rate over the last six months of the year would be consistent with hitting the upper limit of the longer-run range under alternative A--which would provide more scope for financing expected economic recovery. If the Committee were to adopt the second-quarter targets of alternatives B or C, some acceleration in growth over the 6-month June-to-December period--to just above a 4 percent annual rate under alternative C--would be in prospect even if growth for the year were constrained to 4¾ percent. Should the Committee accept growth in M1 for the year at the upper limit of its longer-run range, even more rapid growth in the second half would be in prospect (5 to 6 percent, depending on whether alternative B or C is adopted at this meeting). Alternatives A B C MarchJune Target 4½ 3 l½ Implied Growth June to December to Hit QIV '81 to QIV '82 Growth of: 4 4¾ 5½ 1.2 1.9 2.7 2.7 3.4 4.2 4.1 5.0 5.8 -11- Directive language (16) directive. Given below is a suggested operational paragraph for the The specifications adopted at the meeting on February 1-2 are shown in strike-through form. The phrase in brackets is presented as an option that would effectively give added weight to M2 in operations in the circumstances of the forthcoming period. IN THE SHORT RUN, the Committee seeks behavior of reserve aggregates [DEL: over the balance of the quarter] consistent with GROWTH OF M1 AND M2 FROM MARCH TO JUNE AT ANNUAL RATES OF ABOUT ____ PERCENT AND ____ PERCENT RESPECTIVELY [DEL: bringing M1 and M2 their longer run target ranges for the year. the recent surge in growth of M1, into time over Taking account the Committee seeks no of further at M2 in growth and period March to January the for growth inM1 anannual be would M1 in decline Some percent. 8 around of rate range longer-run the of attainment rapid more with associated in pressure reduced of context in and would be acceptable the the money market.] [THE COMMITTEE ALSO NOTED THAT DEVIATIONS FROM THESE TARGETS SHOULD BE EVALUATED IN LIGHT OF THE POSSIBILITY THAT M2 WOULD BE LESS AFFECTED OVER THE PERIOD THAN M1 BY DEPOSIT SHIFTS RELATED TO THE TAX DATE AND BY CHANGES IN THE RELATIVE IMPORTANCE OF NOW ACCOUNTS AS A 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 per- 16]____ TO ____ percent. 12 to sistently outside a range of [DEL: APPENDIX I RESERVE TARGETS AND RELATED MEASURES INTERMEETING PERIOD (Millions of dollars; not seasonally adjusted) Reserve Targets for Intermeeting Sub-Period (4-week average basis) NonTotal borrowed Date Reserves Path Reserves Constructed (1) February Implied Adjustment Borrowing Projection of Reserves Demanded (4-week average basis) Total Reserves Reserves (2) (3) Sub-Period: For Remaining Statement Weeks of Intermeettig Required Excess 4-week Average Reserves Reserves Basis Period (6) (7) (5) (4) February 10 to March 3 5 41,2702 39,7702/ 41,270 41,045 225 1500 1500 12 41,309=' 39,8097 41,214 40,994 220 1405 1394 19 41,158.' 39,658,/5/ 41,077 40,795 282 1419 1278 26 41,181- 39,581-- 41,065 40,802 263 1484 1139 41,112 39,592 41,112 40,799 313 1520 Actual 4-week Average Sub-Period: March 1/ 2/ 3/ 4/ 5/ 6/ 7/ 8/ 9/ 10/ March 10 to March 31 3 9 , 3 76 6/ 7 6/ 37,8767/8 39,102 38,802 300 1226 1226 12 39,239- 37760- 39,094 38,806 288 1334 1398 19 26 39,15939,002 , 7 3 9 9/10/ 38,988 37,739 39,002 38,703 38,698 285 304 1249 1263 1346 1405 5 37 Represents borrowing in remaining statement weeks (as intermeeting sub-period progresses) implied by each weekly updating of the 4-week average nonborrowed reserves path. The movement in implied borrowing represents deviations in total reserves from target as well as any compensation for misses in nonborrowed reserves from target in earlier weeks of the intermeeting sub-period. Total and nonborrowed reserves paths adjusted upward by $39 million due to changes affecting the reserves multiplier. Total and nonborrowed reserves paths adjusted downward by $151 million due to changes affecting the reserves multiplier. Total and nonborrowed reserves paths adjusted upward by $23 million due to changes affecting the reserves multiplier. Nonborrowed reserves path adjusted downward by $100 million to offset the unusually large borrowing in the week of February 24. Total and nonborrowed reserves paths adjusted downward by $2 billion due to changes affecting the reserves multiplier. Total and nonborrowed reserves paths adjusted downward by $137 million due to changes affecting the reserves multiplier. Nonborrowed reserves path adjusted upward by $21 million to offset the unexpectedly low borrowing in the week of March 10. Total and nonborrowed reserves paths adjusted downward by $80 million due to changes affecting the reserves multiplier with some allowance for the weakness in M2. Nonborrowed reserves path adjusted upward by $59 million to offset the reduced demand for borrowing in the week of March 17. Appendix II Interest Rates Assumed in the Greenbook GNP Projection (Quarterly averages, percent) 1982 Federal Funds 3-month Treasury Bills 12% 13k Recently Offered Aaa Utility Bond 15-5/8 Fixed Rate Mortgage 17-3/8 12 14% 16% 12 14% 16k 14% 16% Table 1 Selected Interest Rates March 29. 1982 Percent 1980--High Low 19.83 8.68 16.73 6.49 14.39 7.18 15.70 6.66 20.50 8.17 19.74 7.97 16.64 8.12 21.50 11.00 14.29 8.61 13.36 9.51 12.91 9.54 15.03 10.79 10.56 7.11 16.35 12.18 15.93 12.28 14.17 10.73 1981--High 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 1981--Feb. Mar. 15.93 14.70 14.79 13.36 12.99 12.28 14.13 12.98 16.14 14.43 15.49 13.94 16.29 15.12 19.43 18.05 13.65 13.51 13.19 13.12 12.80 12.69 14.58 14.41 10.10 10.16 15.13 15.40 15.24 15.74 14.13 14.18 Apr. May June 15.72 18.52 19.10 13.69 16.30 14.73 12.79 14.29 13.22 13.43 15.33 13.95 15.08 18.27 16.90 14.56 17.56 16.32 14.10 15.56 16.92 17.15 19.61 20.03 14.09 15.08 14.29 13.68 14.10 13.47 13.20 13.60 12.96 15.48 15.48 14.81 10.62 10.79 10.67 15.58 16.40 16.70 16.54 16.93 16.17 14.59 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 16.92r 18.13 16.64 16.92 16.61 15.10 15.51 1982--Jan. Feb. 13.22 14.78 12.28 13.48 12.77 13.11 12.93 13.71 13.51 15.00 13.09 14.53 12.01 13.11 15.75 16.56 14.64 14.73 14.59 14.43 14.22 14.22 15.88 15.97 13.28 12.97 17.40r 17.60 17.80 18.00 16.19 16.21 1982--Jan. 6 13 20 29 12.98 12.42 12.96 13.98 11.46 11.85 12.36 12.99 12.23 12.63 12.99 13.07 12.28 12.81 13.10 13.53 12.94 13.03 13.50 14.18 12.60 12.59 13.03 13.73 11.81 11.77 11.95 12.20 15.75 15.75 15.75 15.75 14.20 14.57 14.86 14.83 14.30 14.67 14.78 14.60 13.99 14.32 14.33 14.20 16.04 16.12 16.00 15.59 13.36 13.44 13.16 13.15 17.30 17.44 17.61 17.59 17.56 15.98 -- 16.29 18.04 16.20 -- 16.30 Feb. 3 10 17 24 14.77 15.19 15.61 13.86 13.17 13.92 14.41 12.82 12.93 13.32 13.51 12.78 13.85 13.93 14.36 12.70 14.60 15.32 15.84 14.57 14.23 14.83 15.39 14.05 12.49 12.85 13.26 13.47 15.96 16.50 16.50 16.86 14.60 15.01 14.96 14.44 14.43 14.81 14.58 14.04 14.18 14.63 14.39 13.82 15.97 16.34 16.00 15.57 13.13 13.09 12.96 12.70 17.56 17.65 17.66 17.52 18.00 16.47 Mar. 3 10 17 24 31 14.07 14.35 14.89 14.48 12.32 12.25 12.77 12.75 12.48 12.11 12.56 12.51 12.79 12.06 12.96 12.67 14.04 13.77 14.31 14.23 13.63 13.43 13.90 13.79 13.29 13.45 13.52 13.51 16.50 16.50 16.50 16.50 14.17 13.78 14.19 14.15 13.84 13.66 13.93 13.83 13.60 13.42 13.59 13.46 15.31 15.15 15.14 15.08p 12.53 12.71 12.99 13.04 17.29 17.19 17.12 n.a. 14.90 14.11 14 35 . p 13.04 12.75 13.00 12.65 12.50 12.67 14.50 14.31 14.32 13.98 13.81 13.83 16.50 16.50 16.50 14.24 114.22 4 32 . p 13.89 13.90 14 01 . p 13.56 13.49 13.64p Daily--Mar. 19 25 26 NOTE Weekly data for columns 1,2,3,and 5 through 11 are statement week averages. Weekly data in column 4 are average rates set In the auction of 6month 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-day quotes for Friday and Thursday, respectively, following the end of the statement w ek. Column 14 Is an average of contract interest rates on commitments for conventional first mortgages with 80 percent loan-to-value ratios made by a sample of insured savings and loan associations on the Friday -- 16.56 17.99 16.20 -- 15.62 17.16 15.47 17.26 -- 5.:6 15.37 following the end of the statement week The FNMA auction yield Is the average yield In a bl-weekly auctlon for short term forward commitments for government underwritten 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 FHANA mortgages carrying the coupon rate 50 basis points below the current FHANA celling FR 1367 (1182) Table 2 Net Changes In System Holdings of Securities March 29, 1982 Millions of dollars, not seasonally adjusted Peiod 3 1-5 50 t-year 1977 1978 1979 1980 1981 1980--Qtr. IV 1981--Qtr. I II III IV 1981--Sept. Federal agencies net purchases Treasury coupons net purchases Treasury rbills not change5 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 total15 553 1,063 454 811 379 510 10 1-year --47 131 217 133 4,660 7,962 5,035 4,564 2,768 792 45 317 398 360 -58 100 -- -- -- 100 - -- -2,514 2,135 2,912 -23 115 122 -469 607 164 64 -89 182 -23 836 976 --- -- 2,803 80 626 165 108 979 133 360 - -- - -- -- 308 Net change outright over vr 10 758 1,526 523 703 393 4 428 104 5 29 - ove0 Net RPs 213 24 -24 -- 1,433 127 454 668 494 10,035 8,724 10,290 2,035 8,491 -1 -2,892 -1,774 -2,597 2,462 684 -- -- --- ---- -- -2,555 2,944 3,855 -1,694 -1,352 424 - -- 494 4,247 3,305 - -- -- -- 275 -500 --- -- -494 -- -1,131 2,333 3,045 -209 2,747 767 - 1,107 Oct. Nov. Dec. -1,116 1,750 2,170 -80 -100 526 --165 -108 100 879 -133 -- 360 - 1982--Jan. Feb. -3,356 148 -20 50 -- -- 70 -- - - --- -3,424 900 - 191 -3,770 1982--Jan. 6 13 20 27 -243 -418 -670 -2,025 -- ----- ---- ----- -- ----- ----- ---- --- ---- -259 -438 -702 -2,025 -4,116 -2,330 3,588 3,177 Feb. 3 10 17 24 -559 560 456 -- ---50 ----- ----- ---70 --- -- -- ---- --- -4 -567 560 511 4,428 -8,203 5,235 -5,254 Mar. 3 10 17 -547 -1,074 92 ---- ---- ---- --- -- 24 31 99 -- LEVEL--ar. 24 48,0 - 20 15.6 ---- --- ---- -- -- 35.9 10.2 16.7 78.4 1 Change from end-of-period to end of-period. 2 Outright transactions in market and with foreign accounts, and redemptions (-) in bill auctions, 3 Outright.transactions in market and with foreign accounts, and short-term notes acquired in exchange for maturing bills. Excludes redemptions, maturity shifts, rollovers of maturing coupon issues, and direct Treasury borrowing from the System. 4 Outright transactions in market and with foreign accounts only. Excludes redemptions and maturity shifts. 2.1 - -99 - 5.4 --- 1.0 6 total - 0.5 - 9.0 -552 -1,087 92 135.5 2,084 -1,967 -, -09 -1.0 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 Treasury coupon issues. 6 Includes changes in RPs (+), matched sale-purchase transactions (-), and matched purchase-sale transactions (+). FR 1368 (7/81) STRICTLY CONFIDENTIAL (FR) CLASS II-FOMC Table 3 Security Dealer Positions and Bank Positions March 29, 1982 Millions of dollars U.S. government securities dealer positions r s cash futures and forwards bills I coupons bills coupons Period 1980--High Low 8,838 1,972 2,263 -1,482 1981--High Low 15,668 540 4,633 540 -12,865 -4,535 1981--Feb. Mar. 13,317 13,597 1,812 3,415 Apr. May June 8,518 1,676 5,547 July Aug. Sept. 2,950 4,324 snderwitin syndicate positions corporate municipal bonds bondsent excess** reserves adjustent Member bank resve positions borrowing at FRB** seasonal exendedtotal seasonal de total 933 -207 3,298 12 174 5 816 0 3,438 215 -4,676 -2,514 562 -21 2,597 145 309 30 464 * 2,912 317 -12,203 -11,561 -2,798 -3,251 350 280 1,134 789 148 196 21 15 1,303 1,000 3,149 2,745 3,278 -7,277 -6,486 -9,934 -3,050 -2,822 -2,925 169 257 338 1,168 1,954 1,740 162 269 291 8 6 7 1,338 2,228 2,037 -8,340 340 292 414 1,429 1,105 933 247 235 222 80 -9,830 -3,012 -2,972 -2,856 3 -10,071 5,611 3,314 2,242 1,614 301 1,679 1,420 1,456 Oct. Nov. Dec. 4,781 5,037 2,414 1,629 3,821 1,970 -8,575 -7,120 -5,402 -3,655 -4,307 -4,144 278 344 319 591 403 433 152 95 54 438 165 148 1,181 663 636 1982--Jan. Feb. 3,317 1,853 1,824 2,351 -6,108 -7,672 -3,118 -3,177 418 307p 1,245 75 131p 2 197 2 3 p 1,518 1,790 1,426p 1982--Jan. 6 13 20 27 7,241 3,732 1,728 2,895 2,281 2,202 1,413 1,958 -5,962 -5,617 -6,852 -7,000 -3,550 -3,160 -3,208 -3,234 622 344 528 172 1,201 753 685 2,176 60 53 70 96 193 194 195 199 1,454 1,000 950 2,471 Feb. 3 10 17 24 1,692 1,844 800 2,817 1,943 3,063 1,844 2,411 -6,847 -8,102 -8,476 -7,175 -3,584 -3,437 -2,908 -2,985 481 144 568 3 1,525 1,325 1,547 1,534 110 114 134 146p 212 225 227 222p 1,847 1.664 1,908 1,902 -8,379** -7,349** -6,923** -6,670p** -3,080** -3,224** -3,087--* -3,118p** 532 6p 3 5p 337P 25 4p 1,131p 99 0p 976p 147p 151p 187p 17 3 p 2 88 Mar. 3 10 17 24 31 1,932** 3, 0 5 9 ** 3,008** 1 4,35 p** 1,986** 2,385** -1,806** -2 ,510p** J 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. I 1,170p p 306p 301 p 311 p 1,566p 1,447p 1,464p 1,654p --- Weekly data are daily averages for statement weeks, except for corporate and municipal issues in syndicate, which are Friday figures. Monthly averages for excess reserves and borrowing are weighted averages of statement week figures. Monthly data for dealer futures and forwards are end-of-month figures for 1980. ** Strictly confidential FR 1389 (7/81)
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