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November 12, 1982 Strictly Confidential (FR) 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) CLASS I - FOMC November 12, 1982 MONETARY POLICY ALTERNATIVES Recent developments (1) M2 grew at about an 8 percent annual rate in October (and M3 at a 9 percent rate), while M1 expanded at about a 20 percent annual rate. Growth in M2, probably held down to a minor degree by shifts of ASC funds to market instruments, ran increasingly above the path set consistent with the Committee's 8½ to 9½ percent quarterly growth target as the intermeeting period progressed. This path had called for relatively slow growth in October and more rapid growth in subsequent months. (2) The strength in M2 reflects greater growth in both its M1 and nontransactions components,relative to initial expectations, abstracting from estimated ASC effects. It now appears that the effect on the monthly average of M1 in October from the disposition of maturing ASC balances was much larger than we had anticipated; more seems to have been initially shifted and the funds have remained in transaction accounts longer. Never- theless, growth in M1 in October abstracting from shifts was still probably around 10 percent.1/ (3) Total reserves grew at a 9½ percent annual rate in October, with most of the increase reflecting the rise in required reserves associated with the strength in transactions accounts. Given a $475 million drop in the average level of adjustment borrowing in October, nonborrowed reserves expanded at about a 25 percent annual rate last month. The nonborrowed path constructed following the October FOMC meeting implied borrowing of 1/ Estimates of the impact of maturing ASCs on M2 and its composition are based on information obtained from banks through the Reserve Bank contact group, cross-section econometric analysis of the experience of individual banks, and examination of recent patterns of aggregates deposit flows at all banks and thrifts. KEY MONETARY POLICY AGGREGATES (Seasonally adjusted, annual rates of growth) 1982 Q4 to 1982 Oct. July Aug. Sept. Oct. 1981: 1982: Q3 Ml -0.3 10.4 14.0 20.3 5.8 7.9 M2 9.7 14.3 4.8 8.0 9.9 9.6 12.9 15.5 2.1 4.2 11.2 10.2 12.6 18.4 3.4 8.9 10.7 10.5 6.3 6.6 4.4 7.0 Nonborrowed reserves 2 / 13.1 15.9 11.5 Total reserves -1.6 8.8 2.8 Adjustment borrowing4 / Excess reserves Money and Credit Aggregates (Nontransaction component) M3 Bank Credit Reserve Measures! 7.43/ 24.6 4.2 7.0 23.6 9.6 4.3 6.2 6.8 12.2 6.7 7.3 7.6 641 422 815 337 314 312 384 412 / Monetary base Memo: 7.63/ (Millions of dollars) I/ 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. Nonborrowed reserves include special borrowing and other extended credit from the Federal Reserve. Measured from December--January average base. Includes seasonal borrowing. around $300 million. The implied level of borrowing rose during the inter- meeting period, but not commensurately with the strengthening of M2, since account was taken of the Committee's willingness to accommodate exceptional liquidity demands and the fact that M2 growth in October, though substantially faster than initial expectations for the intermeeting period, was not necessarily out of keeping with the quarterly target range. 1/ (4) Reflecting limited pressure to borrow at the discount window and a ½ percentage point cut in the discount rate soon after the October FOMC meeting, the federal funds rate declined from somewhat above 10 percent in September to the neighborhood of the 9½ percent discount rate throughout the intermeeting period. Most other rates dropped by much more, in part because of expectations that the Federal Reserve would promote a further easing of money market conditions. Despite some rate increases in recent days as a further discount rate cut has not been forthcoming, private shortterm rates have dropped about 1½ percentage points on balance since the early October meeting, while yields on Treasury bills have fallen considerably less as concerns about private credit risks apparently have lessened. Corporate and Treasury bond rates have dropped about 1 to 1½ percentage points since early October. The average commitment rate on conventional mortgages at S&Ls has dropped 1¼ percentage points and the continuing easing in mortgage markets reportedly has led to a noticeable pickup in institutional lending activity. (5) Bank credit continued to grow moderately in October, registering a 7 percent annual rate of increase. Loan growth remained in general relatively weak, but banks stepped up their acquisitions of Treasury securities. Business loan growth slowed to around a 7 percent annual rate last month, even though it was still being boosted by the 1/ See Appendix I for intermeeting reserve path adjustments. effects of merger-related financings arranged in September. Total short-term borrowing by nonfinancial business weakened further, as commercial paper outstanding contracted sharply again in October. This dropoff in short-term borrowing reflected an increased issuance of long-term debt in response to the continuing downtrend in bond yields. (6) After dropping rather sharply immediately following the last FOMC meeting, the dollar has appreciated further in recent weeks. On percent since the Committee balance, the dollar has advanced about 1 1/2 meeting, . The strength in the dollar occurred in the face of news of a sharply larger third-quarter trade deficit, and of greater declines in U.S. interest rates, on balance, than in foreign interest rates over the period. Alternative near-term targets (7) The table below presents three alternative targets for M2 for the current quarter, along with associated federal funds rate ranges. Alternatives B and C encompass growth rates of M2 (and also M3) for the quarter consistent with the Committee's decision with respect to these aggregates at the previous meeting, while alternative A looks to somewhat higher growth rates. Rates of growth for M1 implied by these M2 paths are shown in the second panel. More detailed data for the alternatives are shown in the table and charts on the next few pages. The quarterly interest rate path underlying the staff's GNP projection is contained in Appendix II. Alt. A Alt. B Alt. C Growth in M2 Sept. to Dec. Oct. to Dec. 10 11 9½ 10¼ 9 9½ Memo: Implicit Ml Growth Sept. to Dec. Oct. to Dec. 12½ 8¼ 11¼ 6½ Federal funds rate range (8) 6 to 9½ 7 to 10½ 10 5 8 to 11½ As appears to have been the case thus far this year, the public's liquidity demands are assumed to remain high over the balance of the year, reflecting the impact of continuing economic uncertainties. Both Ml and M2 this quarter are expected to expand considerably more rapidly than nominal GNP under all three alternatives; and, as shown on the charts and tables on the succeeding pages, the growth rates of the monetary aggregates are expected for the year to be above the upper ends of their respective longer-run ranges. The income velocities of both Ml and M2 thus will decline by unusually large amounts over the QIV '81 to QIV '82 period--about 3¼ and 5 percent, respectively. Alternative Levels and Growth Rates for Key Monetary Aggregates Ml M2 M3 Alt. A Alt. B Alt. C Alt. A Alt. B Alt. C Alt. A Alt. B Alt. C 455.2 460.5 468.3 471.9 474.8 455.2 460.5 468.3 471.6 473.4 455.2 460.5 468.3 471.3 472.1 1946.3 1954.1 1967.1 1985.8 2002.8 1946.3 1954.1 1967.1 1985.3 2000.4 1946.3 1954.1 1967.1 1984.8 1998.1 2355.7 2362.3 2379.8 2401.0 2422.0 2355.7 2362.3 2379.8 2400.5 2419.7 2355.7 2362.3 2379.8 2400.0 2417.4 1982--August September October November December 10.4 14.0 20.3 9.2 7.4 10.4 14.0 20.3 8.5 4.6 10.4 14.0 20.3 7.7 2.0 14.3 4.8 8.0 11.4 10.3 14.3 4.8 8.0 11.1 9.1 14.3 4.8 8.0 10.8 8.0 18.4 3.4 8.9 10.7 10.5 18.4 3.4 8.9 10.4 9.6 18.4 3.4 8.9 10.2 8.7 Sept. - Dec. Oct. - Dec. 12.4 8.3 11.2 6.5 10.1 4.9 10.0 10.9 9.5 10.2 9.0 9.5 10.1 10.6 9.7 10.1 9.3 9.5 10.4 3.3 10.4 3.3 10.4 3.3 9.8 9.5 9.8 9.5 9.8 9.5 8.7 10.7 8.7 10.7 8.7 10.7 1982--August September October November December Growth Rates Monthly Growth Rates Quarterly Average 1982--Ql Q2 Q3 3.5 3.5 3.5 9.7 9.7 9.7 12.0 12.0 12.0 Q4 14.0 13.5 13.0 9.0 8.9 8.7 9.3 9.2 9.0 8.0 7.9 7.7 9.8 9.8 9.7 10.6 10.5 10.5 6.3 6.3 6.3 9.9 9.9 9.9 10.5 10.5 10.5 Annual Growth Rates 1981-Q4 to 198 2 -Q4 Year average 1981 to Year average 1982 CONFIDENTIAL (FR) Class II - FOMC Actual and Targeted M2 and M3 M2 Billions of dollars :B;.'.' C 2000 ACTUAL LEVEL - **SHORT-RUN ALTERNATIVES I I N 1981 I I ~~''''''''"'' O D J F I M I A I M I I J J I A I S I O - 1950 --- 1900 -- 1850 - 1800 I N 1750 D 1982 2400 ACTUAL LEVEL * * SHORT-RUN ALTERNATIVES 2350 2300 2250 2200 2150 2100 O N 1981 D J F M A M J J 1982 A S O N D Chart 2 CONFIDENTIAL (FR) Class Actual and Targeted M1 II FOMC Billions of dollars 480 -ACTUAL LEVEL S* SHORT-RUN ALTERNATIVES S .B -C 5!/2% - 460 -1 450 I 0 1 I 198 N 1981 D J I F I M I A I M I J 1982LJ 1982 I 1 I A S I 0 - 440 - 430 - 420 I N D (9) Under all three alternatives, M1 growth is expected to decelerate--though still remaining strong--in the last two months of the year, reflecting in part an unwinding of the demand and NOW balances built up from some of the proceeds of the very large ASC deposits maturing in October. On the other hand, the nontransactions component of M2 should accelerate from its October pace, when it was held down by transfers of ASC funds to transactions accounts and market instruments. It is expected that the new DIDC money market account will reduce M1 balances and have only a relatively small effect on M2 when it becomes available in midDecember. However, there might be some effects, perhaps raising M1 or M2, in the interim if and as the public lodges funds in deposits in anticipa1/ tion of the new account.(10) Alternative B, which calls for M2 growth this quarter at the upper end of the 8½ to 9½ percent range adopted by the Committee at its last meeting, would be associated with an increase in total reserves at about a 6¾ percent annual rate over the last two months of the year. Given continued strong liquidity demands, such an M2 target might involve a federal funds rate over the intermeeting period fluctuating around the present 9½ percent discount rate and borrowing at the discount window ranging around $350 million. Nonborrowed reserves would expand in parallel with total reserves over the last two months of the year. (11) With many in the market currently expecting some decline in the funds rate (and the discount rate) over the near-term, maintenance 1/ A more detailed assessment of the likely impact of the new instrument will be presented in the blue book for the December meeting. Our initial estimates are for a quite small effect on the aggregates for December, given the late effective date of the instrument. of these rates around recent levels would probably lead to some further back-up in short- and longer-term market rates. A 3-month bill rate moving up to around the 8½ percent area is not unlikely, and private short-term rates might rise 25 to 50 basis points or so. Longer-term interest rates also would tend to rise, but probably by less, given the favorable outlook for curbing inflation and the evidence of weak economic activity. Mortgage rates would probably not fall much further, as bond yields firm and shortterm financing costs of depository institutions tend to edge up. (12) The growth of credit to all nonfinancial sectors appears to be slowing a bit in the fourth quarter, though remaining above the first half pace and also in excess of the expected growth of nominal GNP. Treasury indebtedness is increasing rapidly--at an estimated 18 percent seasonally adjusted annual rate in the fourth quarter--and is projected to continue rising at this pace in early 1983. Growth in credit raised by private non- financial sectors this quarter remains below its first half pace. However, the recent decline of interest rates appears to be stimulating credit usage by households, whose mortgage and other borrowing is projected to pick up this quarter and to continue rising moderately into 1983. Lower rates apparently also are inducing greater borrowing by state and local governments, but bond issuance in anticipation of new regulation at year-end is also a factor behind recent record tax-exempt bond volumes, and the credit demands of this sector are expected to moderate in early 1983. Business borrowing appears to be moderating somewhat in the current quarter as financing needs are held down by a further reduction in inventories, and as greater reliance is placed on equity issuance in the wake of the advance of stock prices. Businesses also are projected to continue the recent pattern of heavier issuance of bonds and reduced borrowing from banks. Largely as a result, bank credit growth in coming months is expected to remain close to the more moderate pace established in the second half of this year. (13) An increase in the Committee's fourth-quarter M2 target to a 10 percent annual rate, as in alternative A, might be required for some further easing of money market conditions in an environment of continued strong liquidity demands on the part of the public. The percentage point of more rapid growth in M2 under this alternative, as compared with alternative B, would entail a relatively more rapid expansion in M1--by about 1¼ percentage points over the 3-month period. What information we have suggests that--in view of the availability of market-related rates on instruments encompassed by M2--M1 may have at least twice the elasticity with respect to market interest rates as M2. Thus, a given change in market interest rates will have a more substantial impact on M1 growth rates than on M2 rates. (14) Under alternative A, we would expect the federal funds rate to decline from its present level to the area of 8½ percent, with total reserves rising at about an 8 percent annual rate in November and December. Assuming such a decline in the funds rate, adjustment borrowing would be at minimal levels ($150 million or less), given the present or a somewhat lower discount rate. Nonborrowed reserves would rise at about an 11½ percent annual rate over the balance of the year. (15) The further easing in bank reserve positions contemplated by alternative A might involve a drop in the 3-month bill rate to around 7½ percent, or perhaps somewhat lower depending on expectations of further policy adjustments. As markets ease, and confidence in markets and the economy improves, some little further narrowing in quality spreads might -10develop. The bank prime rate would probably decline to around 11 percent. Bond rates would also likely share in these downward adjustments, as investors hastened to lock up still relatively high longer-term yields. And the lower cost of thrift institution deposits would bring additional downward pressure on mortgage rates. The further decline in U.S. interest rates would tend at least to blunt the strength of the dollar on foreign exchange markets, and may well bring some depreciation. (16) Alternative C involves M2 growth over the fourth quarter at a 9 percent annual rate and constraint on reserve provision that would probably lead to a federal funds rate of 10 percent or somewhat higher. Total reserves would be expected to expand at a 5 percent annual rate over the last two months of the year. With the discount rate unchanged at 9 percent, borrowings would likely be in the area of $600 million, and nonborrowed reserves would rise at only a 1 percent annual rate. (17) A substantial reaction to a tightening of basic reserve positions would be expected in short-term and longer-term markets. The 3-month bill rate and other short-term rates could rise by as much as 1 percentage point. Longer-term rates would also adjust upwards, though much higher rates would probably not be long sustained. A significant rise in short rates would probably be seen by market participants as retarding economic recovery and reducing the odds on a strengthening of private credit demands, thus making the present or higher levels of longterm rates attractive to investors despite a near-term rise in short rates. -11Directive language (18) Given below are suggested operational paragraphs for the directive, with specifications adopted at the meeting on Ocotber 5 shown in strike-through form. Specification of the behavior of M1 over the balance of the year [DEL: is]REMAINS subject to unusually great uncertainties because [DEL: be will it substantially affected by]OF special circumstances[DEL: in-the-very-near-term-by]THE reinvestment of funds from maturing all savers certificates and [DEL: later by] the public's response to the new account directly competitive with money market funds mandated by recent legislation. The [DEL: probable] difficulties in [DEL: during the period] suggest THAT much less than interpretation of M1 usual weight be placed on movements in that aggregate during the current quarter. These developments are expected to affect M2 and other broader aggregates to a much smaller extent. In all the circumstances, the Committee seeks to maintain expansion in bank reserves needed for an orderly and sustained flow of money and credit, consistent with growth of M2 (and M3) in a range of 9½]____ 8½ to around [DEL: TO ____percent at an annual rate from September to December, and taking account of the desirability of somewhat reduced pressures in private credit markets in the light of current economic conditions. Somewhat slower growth, bringing those aggregates around the upper part of the ranges set for the year, would be acceptable and desirable in a context of declining interest rates. Should economic and financial uncertainties lead to exceptional liquidity demands, somewhat more rapid growth in the broader aggregates would be tolerated. -12The 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 persistently outside a range of [DEL: 10½]____ to 7 TO ____percent. Appendix I RESERVES TARGETS AND RELATED MEASURES INTERMEETING PERIOD (Millions of dollars; not seasonally adjusted) Reserves Targets for Intermeeting Sub-Period (average for subperiod) Date Reserves Path Constructed Total Reserves (1) Nonborrowed Reserves Projection of Reserves Demanded (average for sub- eriod) Total Reserves (3) (2) 3-Week Sub-Period: October 8 15 22 Actual 3-week Average November (4) Excess Reserves (5) Average for Sub-Period Statement Weeks of Intermeeting Periodi / (6) (7) October 13 to October 27 40,454 40,5871/ 40,587 40,154 40,2872/ 40,2872/ 40,454 40,568 40,583 40,160 40,197 40,211 300 372 372 300 281 296 3/ 40,576 40,2922 / 40,576 40,212 364 2842. 3-Week Sub-Period: October Required Reserves Implied Adjustment Borrowing For Remaining 29 40,783/ 5 12 5 40,8251/ 40,8586/ 300 300 315 November 3 to November 17 40,483 4/ 40,818 40,451 367 335 335 40,525L/ 40,558/ 40,865 41,022 40,481 40,595 384 427 340 464 377 600Z/ 1/ Represents borrowing in remaining statement weeks (as intermeeting sub-period progresses) implied by each weekly updating of the sub-period average nonborroved 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. 2/ Total and nonborrowed reserves paths adjusted upward by $133 million, reflecting multiplier adjustments. 3/ Nonborrowed reserves includes, and adjustment borrowing excludes, $75 million of special-circumstance Sorrowing in the week of October 20 that was classified as adjustment credit. 4/ Total and nonborrowed reserves paths adjusted upward by $116 million, reflecting multiplier adjustments, revisions to required reserves received as the week progressed, and a redistribution of deposit demands within the target period. Preliminary upward adjustments of $163 million had been taken earlier. 5/ Total and nonborrowed reserves paths adjusted upward by $42 million, reflecting multiplier adjustments and a degree of accommodation to stronger money, 6/ Reflects adjustments in light of heavy borrowing on Wednesday that was carried over to Thursday because of the holiday (see footnote 7). 7/ Reflects very large borrowing on Wednesday November 10 that, because of the holiday on the following Thursday, necessarily raises the average level for the last week of the intermeeting period above what would otherwise be implied by the nonborrowed reserve path. Appendix II Interest Rates Underlying Greenbook GNP Forecast (Quarterly averages) Federal funds 1982 Q3 (actual) Q4 1983 Q1 Q2 Q3 Q4 3-month Treasury bill 11.01 9.32 9 7% 94 74 8 10 9k 10 Recently Offered Aaa Utility Bond Fixed-rate Mortgage Commitment 14.55 12-1/8 16.17 14-1/8 12 12% 12% 12% 13 13% 13% 13% Table 1 Selected Interest Rates November 15. 1982 Percent Long.Term Short-Term Period federal funds 1 S Treasury bills secondary uon market 3-month 1-year 2 I 3 -month 4 CDe econdary market 3-month 5 comm. paper money market mutual bank prime -month 6 fund 7 loan 8 U.S. government constant maluriy yields 3-year 9 10-year 10 30-year 11 corporate Aaa ulily recently ofered 12 municlpal Bond Buyer 13 home mortages secondary market primry FNMA GNM conv. auction security 14 15 16 1981--nigh low 20.06 12.04 16.72 10.20 15.05 10.64 15.85 10.70 18.70 11.51 18.33 11.39 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 1982--RHih Low 15.61 9.04c 14.41 7.43 13.51 8.24 14.36 7,73 15.84 8.96 15.56 8.19 13.89 8.65 16.86 12.00 15.01 9.92 14.81 10.49 14.63 10.54 16.34 11.75 13.44 9.25 17.66 13.91 18.04 15.78 16.56 12.58 1981--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 14.80 12.35 12.16 15.32 14.33 12.09 18.45 16.84 15.75 15.50 13.11 13.66 15.15 13.19 13.72 14.68 13.35 13.45 17.24 15.49 15.18 12.83 11.89 12.90 18.45 17.83 16.92 18.13 16.64 16.92 16.61 15.10 15.51 1982--Jan. Feb. Mar. 13.22 14.78 14.68 12.28 13.48 12.68 12.77 13.11 12.47 12.93 13.71 12.62 13.51 15.00 14.21 12.90 14.62 13.99 12.01 13.11 13.49 15.75 16.56 16.50 14.64 14.73 14.13 14.59 14.43 13.86 14.22 14.22 13.53 15.88 15.97 15.19 13.28 12.97 12.82 17.40 17.60 17.16 17.80 18.00 17.29 16.19 16.21 15.54 Apr. May June 14.94 14.45 14.15 12.70 12.09 12.47 12.50 11.98 12.57 12.86 12.22 12.31 14.44 13.80 14.46 14.38 13.79 13.95 13.74 13.49 13.07 16.50 16.50 16.50 14.18 13.77 14.48 13.87 13.62 14.30 13.37 13.24 13.92 15.44 15.24 15.84 12.59 11.95 12.45 16.89 16.68 16.70 16.27 17.22 15.30 15.84 July Aug. Sept. 12.59 10.12 10.31 11.35 8.68 7.92 11.90 10.37 9.92 12.24 10.11 9.54 13.44 L0.61 10.66 12.62 9.50 9.96 12.86 11.02 9.73 16.26 14.39 13.50 14.00 12.62 12.03 13.95 13.06 12.34 13.55 12.77 12.07 15.61 14.47 13.57 12.28 11.23 10.66 16.82 16.27 15 43 -15.78 - 15.56 14.51 13.57 Oct. 9.71 7.71 8.63 8.30 9.51 9.08 a.s. 12.52 10.62 10.91 11.17 12.34 9.69 14.61 - 12.83 1 8 15 22 29 10.15 10.14 10.27 10.31 10.12 8.00 8.31 8.16 7.75 7.50 10.05 10.04 10.13 9.95 9.63 9.75 9.61 9.70 9.44 9.20 10.17 10.53 10.81 10.84 10.53 8.88 9.99 10.14 10.00 9.78 9.93 9.86 9.79 9.60 9.46 13.50 13.50 13.50 13.50 13.50 12.30 12.08 12.23 12.10 11.78 12.74 12.53 17.61 12.36 11.93 12.46 12.21 12.27 12.00 11.80 13.88 13.87 13.67 13.28 13.30 10.74 10.75 10.74 10.58 10.48 15.59 15.56 15.38 15.19 15.13 6 13 20 27 10.77 9.60 9.53 9.44 7,82 7.58 7.51 7.81 9.53 8.38 8.24 8.53 9,23 7.73 7.76 8.47 10.58 9.59 9.16 9.07 10.09 9.18 8.70 8.69 9.47 9.46 9.09 8.87 13.50 13.00 12.00 12.00 11.52 10.38 10.30 10.51 11.63 10.67 10.64 10.88 11.75 11.02 10.91 11.12 12.43 12.22 12.06 12.15 9.75 9.?5 9.69 10.05 Nov. 3 10 9.43 9.45 7.85 7.90 8.45 8.40 8.23 8.40 9.03 8.96 8.69 8.70 8.81 8.65 12.00 12.00 10.21 9.92 10.63 10.49 10.92 10.54 11.92 I1.75p 9.96 9.92 Nov. 5 12 9.40 9.50p 7.78 8.28 8.36 8.54 --- 8.93 9.11 8.72 8.82 9.91 .97p 10.48 10.56p 10.59 4 O0. 5p 1982--Sept. Oct. 12.00 12.00 NOTE: Weekly data for columns 1, 2,3, and 5 through 11 are statement week averages. Weekly dta in column 4 are average rates set In the auction ol -month 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 t-day quotes for Friday and Thursdy. reepectively. following the end of the latement week. Column 14 is an average of contract interest rates on commitments for conventional first mortgages with BDpercent loan-to-value rllos made by a sample of Insured Savings and loan associatlons on the Friday 9 - 15.40 -- 13.84 13.65 13.72 13.54 13.36 14.96 14.60 14.20 14.15 S 13.21 12.58 12.73 S 12.81 13.91 n.a. S -- 12.64 12.62 -- following the end of the statement week. The FNMA auction yield is the average yield in a bi-weely auctlion or short-term forward commitments lor government underwrltten mortgages; figures exclude graduated payment mortgages. GNMA yields are average net yields to investors on mortgage-backed securllies for immediate delivery, assuming prepaymenl in 12 years on pools of 30.year FHANA motgages carrying the coupon rte 50 basils points below the current FHANA coling. FR 11f;7 iV'p7t Table 2 Net Changes In System Holdings of Securities 1 Millions of dollars, not seasonally adjusted November 15, 3 Period bills not fchang Federal agencies net purchases Treasury coupons net purchases Treasury witn -y-ear 5-10 1-5 within l-year total over 10 4 1-5 510 over 10 4,361 870 6.243 -3,052 5,337 517 1.184 603 912 294 2,833 4,188 3,456 2,138 1,702 758 1,526 523 703 393 553 1,063 454 811 379 4.660 7,962 5,035 4.564 2.768 -47 131 217 133 792 45 317 398 360 428 104 5 29 - 213 24 -24 -- 1981--Qtr. III IV 2,912 2,803 122 80 607 626 64 165 182 108 976 979 -133 360 -- 1982--Qtr. I II III -4,3297 5,585 150 20 -68 71 50 5707 891 - - - - 81 113 52 123 - - 1977 1978 1979 1980 1981 -324 1982--May 1.759 June 70 6357 1,198 Not RP -2.892 -1.774 -2.597 2,462 684 -- -494 3,855 4,247 424 3.305 -- - -- -4,371 6.208 1.295 -999 -5.375 7.855 -- - - - -325 -6.290 - - - - 1,554 -3.961 4.108 - - oulrgh a hi 10.035 8,724 10.290 2.035 8.491 - -200 Net change total 1.433 127 454 668 494 -- -- - - -200 1982 July 330 71 8917 113 123 - - - -- - 1,526 Aug. 470 - - - - - - - - - - 424 542 Sept. Oct. -649 774 -- -- -- -. - - - - - - -654 3.205 -.. . 1 8 -395 -797 -- -- --- -- - 15 -200 - -- -- -- -- -- 22 -- -- -- -- -- -- -- 29 425 - - -- -- - - -- -- -- -- -- -- - -- -- -- 1982--Sept. Oct. Nov. 1.198 768 __ -4,902 - -- -- -396 -1.460 --- --- -797 -205 -1.403 -838 -- -- -- -- -- -- - - -- 425 -1.324 --- -- -- -- -427 -1,071 -- - - 1.560 6 - 13 433 - 20 221 -- -- - - - -- - - -- -- 221 5,964 27 120 -- -- -- - -- -- -- - - - 120 -5,160 -- --- - 16.0 35.7 12.3 3 10 114 - 1.792 -- - -- -- - - -- -- -499 - -- -- -- - - -- - 839 16.3 80.3 2.6 4.9 17 24 LEVEL--No. 10 54.6 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. Excludesredemptions and maturity shifts. .9 .5 8.9 143.8 -1.8 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 (-I of agency and Treasury coupon issues. 6 Includes changes in RPs (+), matched sale-purchase transactions (-.) and matched purchase-sale transactions (+). 7 Maturing 4-year notes were exchanged on June 30 for special 6-day bills. At their maturity, the bills were exchanged for new 4-year notes. FA 1368 (7181) STRICTLY CONFIDENTIAL (FR) CLASS II-FOMC Table 3 Security Dealer Positions and Bank Positions November 15, 1982 Millions of dollars ~ U.S. government securities dealer positions Period bills cash I coupons I I futures and forwards bills I coupons S I Underwriing syndicate positions I municipal corporate bonds bonds ~-------- excess** reserves adjustnent Member bank reserve positions borrowing at FRB ** Sextended I seasonal (I cludes special) total - -I- 1981--High LoW 15,668 540 4,633 540 -12,865 -4,535 -4,676 -2,514 562 2,597 145 464 -21 2,912 317 1982--High Lov 9.335 -2,699 7,935 -1,207 8,032 -11.077 -4,740 -821 672 0 1,547 172 324 20 1,908 365 1981--Oct. Nov. Dec. 4,781 5,037 2,185 1,629 3,821 2,289 -8,575 -7,120 -5.416 -3,655 -4,307 -4,150 278 344 319 591 403 433 438 165 148 1,181 663 636 1982--Jan. Feb. Mar. 3.704 4.557 6,588 5.043 5,327 5,656 -6,344 -7.594 -6.696 -3,272 -3,173 -2.910 418 304 361 1,245 1,426 1,073 197 232 308 1.518 1,790 1,556 7,721 7,390 7,286 4,846 6,713 3.791 -5.552 -10,129 -6.194 -3,402 -4,350 -2,677 273 359 308 1,156 706 859 245 176 104 1.568 1,117 1.205 5.768 1.330 242 3,446 -1.403 6,240 3,170 -2.522 -2,806 -1,472 314 312 384 420 301 713 50 94 119 691 515 933 -2,147h* 412p 251p 141p 47Rn 6.403 5,613 4,168 392 2.524 -2,755 -2.403 -1,493 -821 -1,116 362 665 320 250 285 935** 670** 1,793 2.824 2,559** 3,340** 2.218 4,582 5,531** 7,489** -1,635 -2.264 -2,582** -2,036** 511 462 261 330 p 806** 1,233p** 2,410** 3,495p** 6.080p** 2.742p** -2,229p** -3. 37p** 581p 3 50 Apr. Hay June July Aug. Sept. Oct. 1982--Sept. Oct. 564** I 8 15 22 29 6 13 20 27 Nov. 3 10 17 24 -1,642 1,532 3.042 -255 432 3.626 1,826 2,644** 2,857 2,185 341 1.286 -1,207 4,913** dealer cash positions consist of securities already delivered, commit NOTE: Government securities on an outriqhtbasisfor immediate delivery (5business days or less), and ments to buy (sell) securitees fordelayed delivery (more than 5 business days) Futures and forward certain "when issued'securities positions include all other commitments involving delayed delivery; futures contracts are arranged on consists of issuesin syndicate, excluding organized exchanges. Underwriting syndicate positions trading positions p 296 726 1,125 592 517 116 116 116 118 124 379 178 123 117 110 321 1B3p 186p 4 80p 507 948 1,330 810 753 606 365 516 452p 9 17 p 9 196p 190p 45 2 p 7 0p 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 tor 1980. 'Strictly confidential FR 110 i7?'An
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