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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 some material may have been redacted from this document if that material was received on a confidential basis. Redacted material is indicated by occasional gaps in the text or by gray boxes around non-text content. 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 optical 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. Content last modified 6/05/2009. CONFIDENTIAL (FR) SUPPLEMENT CURRENT ECONOMIC AND FINANCIAL CONDITIONS Prepared for the Federal Open Market Committee By the Staff Board of Governors of the Federal Reserve System May 22, 1970 SUPPLEMENTAL NOTES The Domestic Economy Orders for durable goods. New orders for durable goods increased by 1 per cent in April, according to the preliminary report. They remained slightly below the first-quarter average and 7 per cent below the fourth-quarter average. NEW ORDERS FOR DURABLE GOODS Seasonally adjusted, monthly averages, billions of dollars 1969 QIV 1970 QI April Prel. 31.1 29.1 28.9 Primary metals Iron and steel Other primary metals 5.0 2.3 2.7 4.6 2.0 2.6 5.0 2.2 2.8 Motor vehicles and parts Household durable goods Defense products Capital equipment Machinery and equipment 4.1 2.0 2.1 8.8 6.5 3.6 2.0 1.7 8.5 6.3 3.8 2.0 1.4 8.2 6.1 All other durable goods 9.1 8.7 8.5 Total durable goods There were increases from March to April in primary metals, machinery and equipment, and motor vehicles industries, while there was a substantial decrease in aerospace orders, apparently reflecting declines in both defense and nondefense orders. The capital equipment group, which includes nondefense aircraft orders, declined in April in contrast to the increase in the machinery and equipment group; both of these groups remained below the first-quarter average. -2- The order backlog dropped another 1 per cent in April, the fourth successive monthly decline of that magnitude, in spite of a jump in unfilled orders for iron and steel; except for primary metals and motor vehicle parts, all groups declined. Total durable goods shipments changed little; declines, mainly in iron and steel, were about offset by increases, mainly in the motor vehicles and aircraft industries. - 3INTEREST RATES Late 1969 Highs ) I Lows 1970 May 4 May 21 Short-Term Rates Federal funds (weekly averages) 9.32 (12/11) 3-months Treasury bills (bid) Bankers' acceptances Euro-dollars Federal agencies Finance paper CD's (prime NYC) Highest quoted new issue Secondary market 6-month Treasury bills (bid) Bankers' acceptances Commercial paper Federal agencies CD's (prime NYC) Highest quoted new issue Secondary market 8.08 8.75 11.56 8.39 8.25 (12/29) (12/31) (12/18) (11/20) (12/3) 7.45 (3/25) 8.43 (4/29) 7.84 (5/20) 6.08 7.13 8.00 6.80 7.25 6.91 8.13 8.60 7.27 (5/1) 7.31 6.71 7.88 8.62 7.22 7.88 (3/24) (3/30) (4/20) (4/10) (4/28) 9.05 (12/31) 6.75 7.19 (4/3) 6.75 7.62 (5/1) 6.75 8.15 8.09 8.88 9.00 8.58 6.18 7.25 7.88 6.91 7.36 8.25 8.25 7.65 (5/1) 7.00 8.00 8.13 7.52 6.00 (12/29) (12/31) (12/31) (11/20) (3/23) (3/30) (3/30) (4/17) 6.25 9.15 (12/31) 7.00 7.00 (4/1) 7.00 7.80 (5/1) 7.00 8.25 7.86 (11/24) 6.25 (12/11) 6.20 (L/13) 7.28 3.80 (3/27) 4.50 (5/1) 7.06 5.20 Treasury coupon issues 5-years 20-years 8.33 (12/29) 7.14 (12/29) 7.05 (3/25) 6.55 (2/27) 8.05 7.21 8.01 7.21 Corporate Seasoned Aaa Baa 7.91 (12/31) 8.91 (12/31) 7.78 (3/10) 8.57 (3/10) 7.96 8.87 8.16 9.03 8.85 (12/5) 8.20 (2/27) 8.91 (5/1) 9.05 Municipal Bond Buyer Index Moody's Aaa 6.90 (12/19) 6.57 (12/26) 5.95 (3/12) 6.79 (5/1) 5.75 (3/12) 6.50 (5/1) 7.02 6.74 Mortgage--implicit yield in FNMA weekly auction 1/ 8.87 (12/29) 9.04 (4/20) 9.04 9.13 (5/18) 1-year Treasury bills (bid) Prime municipals Intermediate and Long-Term New Issue Aaa No call protection Call protection 1/ Yield on 6-month forward commitment after allowance for commitment fee and required purchase and holding of FNMA stock. Assumes discount on 30-year loan amortized over 15. -4International Developments Euro-dollar interest rates rose sharply,on Thursday and Friday after moving up considerably in the preceding week. EURO-DOLLAR INTEREST RATES (Per cent) Average for weeks ending Wednesday May 20 May 13 7.40 8.16 8.51 8.56 Call 1-month 3-month 6-month 8.28 8.56 8.81 8.85 Daily May 20 May 22 8.63 8.38 8.94 9.00 9.00 9.25 9.50 9.44 Euro-dollar borrowings by U.S. banks from their branches abroad are estimated--from incomplete data--to have risen moderately from Wednesday May 13 to Wednesday May 20, after declining in the preceding two weeks. (If U.S. bank demand is the explanation for the jump in Euro-dollar rates, liabilities to branches may be higher next week; transactions are for 2-day delivery.) In foreign exchange markets, demand for the Canadian dollar has been very strong. Revaluation rumors circulated yesterday, May 21. Sterling dropped sharply on Thursday, May 21, from about 240.30 to 240.09, and the Bank of England sold $45 million in support of sterling. The pound opened under considerable pressure on Friday morning and the Bank of England sold an additional $40 million to maintain the rate at around 240.07. The pressure on sterling was attributed in London to movement of arbitrage funds into Euro-dollar deposits. The -5- covered arbitrage for 3-month Euro-dollar deposits over U.K. local authority deposits was running on Friday at about 190 basis points in favor of Euro-dollars; the previous Friday it had been only 80 basis points in favor of Euro-dollars. Corrections Section III, page 14, line 14. Insert (1962-1968) after Section III, page 15, line 11. Change "shortfall" to "years". "relative importance".
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