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November 14, 1980 Strictly Confidential (FR) Class I FOMC MONETARY AGGREGATES AND MONEY MARKET CONDITIONS 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 14, 1980 MONETARY AGGREGATES AND MONEY MARKET CONDITIONS Recent developments (1) in October, Rates of expansion of M-1A and M-1B were relatively rapid though below rates of the previous two months. Growth in M-2 and M-3 accelerated slightly as inflows of time deposits at banks and thrifts strengthened and withdrawals from money market mutual funds slowed. The recent growth of M-1A-which was well above the Committee's target path for the last three months of the year--puts it point of the upper end of its within one-half percentage long-run range for the year, while growth rates of the other aggregates are now almost one percentage point above longer-run upper limits (in the case of M-1B and M-2) or equal to the upper limit (in the case of M-3). Though business lending continued to expand rapidly, growth of bank credit declined somewhat from the September rate and the year-to-date growth in this aggregate remains in the lower half of its longer-run range. Monetary Aggregates Sept. Oct. Target Growth for Sept. to December (3 months) Growth from QIV '79 to Oct. '80 Target Growth for 1980 3½ to 6 M-1A 12.6 9.1 2.5 5.5 M-1B 15.8 11.2 5.0 7.4 4 to 6½ M-2 8.5 9.2 7.3 9.8 6 to 9 M-3 9.1 10.9 - 9.4 6½ to 9½ 7.2 6 to 9 Memo: Bank Credit 15.3 13.2 - -2(2) Total reserve growth moderated in October,reflecting a slowing of demand deposits. Nevertheless, over the intermeeting period required reserves outran the System's provision of nonborrowed reserves, leading to increasing member bank borrowings and firming conditions in the funds market.1/ In the most recent statement week, borrowings reached a level of about $2 billion, somewhat higher than expected (a $1.6 billion level of borrowing had been implied by the nonborrowed path). The federal funds rate rose from around 12½ percent in mid-October to an average of 14-5/8 percent in the most recent full statement week. In recent days, funds have traded around 14 percent. Recent Growth in Reserve Aggregates (SAAR) September over June October borrowings 2.8 3.5 Total reserves 14.3 6.0 Monetary base 11.5 10.1 Nonborrowed reserves plus special Memo: ($ million) Average level of member bank borrowings in last month of period: Adjustment borrowings Special borrowings * 1,221 90* 1,310 0 Special borrowings include emergency credit as well as a large borrowing by one bank in the week ended September 24 that resulted from a breakdown of computer facilities. 1/ See Appendix I for the reserve paths and adjustments for the intermeeting period. -3(3) Since the last meeting, short-term interest rates have risen about 3/4 1 to 2 1/4 percentage points on balance, while bond yields increased about 3/4 of a percentage point. Municipal bond yields have now returned to their all-time highs set last spring, and corporate and Treasury bond yields are also close to their centage point increase in earlier peaks. A one per- the basic discount rate to 12 percent, and a surcharge of 2 percentage points applicable to large frequent borrowers of adjustment credit, were announced after the markets closed on Friday. (4) The Treasury continued to be a large borrower in the inter- meeting period, raising about $5 1/4 billion in cash through bills and another $4 1/4 billion through coupon issues. Short-term credit demands of business remained strong as rate relationships continued to induce shifting of business credit demands from the capital market. Such demands continued to be focussed on commercial banks, with commercial paper run-offs accelerating in response to aggressive bank loan pricing. Reflecting both rising bond rates and the increasing cost of deposit funds, the average commitment rate on conventional mortgages at S&L's rose by 30 basis points over the intermeeting period to 14.08 percent; even at that rate the spread of the mortgage rate over the corporate bond. rate remained narrow by historical standards. In some areas of the country mortgage rates of 15 to 16 percent have been posted. (5) Reflecting the further increase in U.S. rates abroad were essentially unchanged, interest rates, while the weighted average foreign exchange value of the dollar has risen by more than 2 percent, on balance, since the last FOMC meeting. U.S. authorities purchased -4$1¾ billion, nearly all against DM, as the System and the Treasury accumulated balances,with the latter seeking to cover its Carter bond obligations. (6) The table on the next page shows seasonally adjusted annual rates of change, in percent, for selected monetary and financial flows over various time periods. Past Three Months QIII '80 Oct. over 01T '79 over July '80 '80 Past Month Oct. 1978 - S 1/ 1979-1 Nonborrowed reserves 6.7 0.7 7.9 6.3 6.2 Total reserves 6.6 2.9 4.1 15.3 6.0 Monetary base 9.2 7.7 7.7 12.0 10.1 M-LA (Currency plus demand deposits) 2/ 7.4 5.0 3.9 13.8 9.1 M-1B (M-1A plus other checkable deposits) 8.2 7.6 5.7 16.4 11.2 M-2 (M-1B plus small time and savings deposits, money market mutual fund shares and overnight RP's and Eurodollars) 8.4 8.9 9.6 10.8 9.2 11.3 9.8 8.9 11.3 10.9 13.5 12.3 5.4 15.5 13.2 Large time deposits Eurodollars 4.3 0.6 1.2 1.8 1.1 -2.5 2.5 -0.9 2.6 2.2 Other borrowings 4/ 1.3 1.0 1.7 2,0 2.6 0.3 0.9 1.2 -1.6 Concepts of Money M-3 (M-2 plus large time deposits and term RP's) Bank Credit Loans and investment of all commercial banks 3/ Manazed Liabilities of Banks (Monthly average change in billions) Memo Nonbank commercial paper l/ QIV to QIV. 2/ Other than interbank and U.S. 3/ / '80 over Seat. '80 -1.8 Government. Includes loans sold to affiliates and branches. Primarily federal funds purchases and securities sold under agreements to repurchase. NOTE: All items are based on averages of daily figures except for data on total loans and investment of commercial banks, commercial paper, and thrift institutions--which are derived from either end-of-month or Wednesday statement date figures. Growth rates for reserve measures in this and subsequent tables are adjusted to remove the effect of discontinuities from breaks in the series when reserve requirements are changed. 6Prospective developments (7) The upper panel of the following table shows three alternative sets of targets for the monetary aggregates for the current quarter; for comparative purposes, the last column indicates the targets for this period established at the last Committee meeting. The lower panel of the table dis- plays the growth rates for the last two months of the quarter implied by these targets. Associated federal funds rate ranges for the intermeeting period are also shown. (Detailed and longer-run data for the monetary aggregates are contained in the table on the next two pages.) Target Established Alt. A Alt. B M-1A 4½ 2½ M-1B 6¾ 5 3½ 5 M-2 8¼ 7¾ 7½ 7¼ Alt. C at October Meeting Growth from September to December (3 months) 2½ Implied Growth from October to December (2 months) M-1A 2 M-1B 4½ 1¾ M-2 7¾ 7 Intermeeting range for Federal funds 12 to 17 13 to 18 (8) -3 -¾ -½ 6½ 14 to 19 -9 to 15 With only six weeks remaining in the year the Committee's policy decision can have little impact on growth rates for the year as a whole, measured from QIV '79 to QIV '80. Under each of the alternatives, growth in M-1B and M-2 over the year would be above, and M-3 near, the upper -7Alternative Levels and Growth Rates for Key Monetary Aggregates M-1A Alt. A Alt M-1B B Alt. C Alt. A Alt. B Alt. C 386,6 388.0 387,9 386.6 387.8 386.1 386.6 387.6 384.7 410.7 413.0 413.8 410.7 412.9 411,9 410.7 412.7 410.4 November December 4.3 -0.3 3.7 -5.3 3.1 -9.0 6.7 2.3 6.4 -2.9 5.8 -6.7 September '80December '80 4.4 2.5 1,0 6.8 4.9 3.4 1980--October November December Growth Rates Monthly 1980 Quarterly Average 1980--QI QII QIII QIV 1979 QIV to 1980 QII 41 41 4t 6 6 6 -4 11 9 -4 11 8k -4 11 7t -24 13k 11i -2k 134 10 -2 134 10ok 0.4 0.4 0.4 1.8 1.8 1.8 91 9k 12% 12k 12 5 5 7 7 1980 QII to 1980 QIV 1979 QIV to 1980 QIV 10 5t 7k Alternative Levels and Growth Rates for Key Monetary Aggregates (cont'd) M-2 1980--October November December M-3 At. A Alt. B Alt, C Alt. A Alt, B Alt. C 1653.3 1664.8 1674.5 1653.3 1664.7 1672.9 1653,3 1664.6 1671.6 1917.8 1940.7 1952.9 1917.8 1940.5 1951.4 1917.8 1940.3 1950.4 8,3 7.0 8.3 5.9 8.2 5,0 14.3 7.5 14.2 6,7 14.1 6.2 8.2 7.8 7.5 11,0 10.7 10.5 7k 7 7i 7% 7% 5% 5% 5% 5% 5 Growth Rates Monthly 1980--November December September '80- December '80 Quarterly Average 1980--QI QII QIII 15% 15% 15% QIV 9 9 9 1979 QIV to 1980 QIT 1980 QII to 1980 QIV 6.4 2% 6.4 12% 1979 QIV to 1980 QIV 91 NOTE: 9% 6.4 12%2 9% 7j 5% 12% 12% 121 1it llk 11 6.8 12 6.8 12 6.8 12 9% 9% 9% The following annual rates of growth in bank credit for the year and for the quarters are expected under alternative B: year 1980, 7; QI, 9k; QII, -k; QIII, 6%; QIV, 11%. Only minor variations in growth rates would be expected under alternatives A and C. -9end of their respective longer-run ranges. Growth of M-1A would be some- what above the midpoint of its longer-run range. However, as may be seen in the charts following this page, the alternatives have different implications for the level of the aggregates relative to growth cones by year-end, particularly for the narrow aggregates. Moreover, the choice among these policy options could have a significant effect on inflationary expectations and real economic activity over the months ahead, and thus on the pattern of economic and financial developments associated with achieving next year's monetary targets. (9) Alternative B continues the Committee's current targets for the fourth quarter, as indexed by M-1A and M-1B. Given what has already occurred in October, to achieve these targets M-1A would have to contract over the remaining weeks of the year. The staff still believes that a significant slowing in the growth of transactions balances is likely, partly because of the sharp run-up in interest rates of the last three months and partly on the assumption that the recent very rapid month-to-month growth in economic activity slows significantly. However, achieving the negative growth in M-1A over the balance of the year implied by alternative B would probably require further near-term increases in short-term interest rates. (10) To achieve the specifications of alternative B, total reserves would have to increase at about a 6 percent annal rate over the October to December period.1/ Nonborrowed reserves would have to contract by about a 1 percent annual rate if 1/ the level of adjustment borrowing is around About 4 percentage points of this increase reflect the additional required reserves associated with the substantial reduction of weekend Eurodollar arbitrage activities. Chart1 CONFIDemAL (F C2ua.L- FOMC Actual and Targeted M-1A and M-1B M-1A SHIons of doaers -400 - Longer-Run Range .- *..Short-Run Alternatives 395 6% * I 0 iI I I N I . 0 F I M. I A I M I J_ I _J 1980 1979 Altematve J F M A I A I S I 0- - 390 .aA. I N 0 Chart 2 CONFIDENTIAL (FR) Actual and Targeted M-2 and M-3 " M-2 Billions of dollars A- 1680 Longer-Run Range -**Short-Run Alternatives -- ' -1660 , 9% -1640 1620 6% S - 1600 -1580 - 1540 -1520 -1500 I N- o b0 I I J "F A M 1979 I I J J M; A S 1480 0 -- 0 1980 .Bllions of dollar M-3 .- ** N 9%% C-- Longer-Run Range .. *" " 1940 .. -1- 920 Short-Runr Alteratlves 0 .0 0.00 000 - 1900 - 1860 - 1840 - 1 1820 S1800 - 1780 - "0 ___1 .,1 N 0 J. I F I M A M 1979 *- Note: A, ., and C atmrnativs airindisnguishable on this scale. I J \ 1980 J 1S I--I AX" I 0 1760 1740 --.I D-- 1740 M -10$1¾ billion and by more if the level of borrowing rises further. However, the exact setting on the nonborrowed reserve operating path will depend in part on bank responses to the new discount rate structure. If past experience with the surcharge is any guide, banks are likely to become less willing borrowers, thereby reducing the level of borrowing for any given spread of the funds rate over the basic discount rate. However, earlier experience with the surcharge was within the context of a bank credit restraint program,and bank behavior may differ under current circumstances. Thus, there is more than usual uncertainty about the demand for borrowing, and therefore about the level of the nonborrowed reserve path consistent with money supply and total reserve targets of alternative B. (11) Under alternative B, a funds rate in the 15 to 16 percent range is likely to emerge over the weeks immediately ahead, and possibly The 3-month bill rate may move up into a higher before the year is out. 14 to 15 percent range and the 3-month CD rate about a point higher, reflecting in part continued relatively strong demands on short-term credit markets over the balance of the year. The Treasury is expected to raise about $4½ billion in cash in the bill market and $7.5 billion in coupon offerings of 2, 4, and 5 years. Business credit demands may fall heavily on short-term markets, especially if, most as seems likely, long-term rates rise further under this alternative, inducing added restraint on corporate bond offerings. Finally, continued intervention by the U.S. to slow the appreciation in the foreign exchange value of the dollar--which is likely to continue rising under alternative B--could generate additional pressure on Treasury yields as the Federal Reserve or Treasury offers securities to the market to finance foreign currency purchases. -11(12) The further increase in interest rates under alternative 3 would intensify pressures on mortgage markets and thrift institutions. Deposit flows are projected to decelerate, but to remain relatively ample. Nonetheless, mortgage rates would be expected to rise considerably in reflection of the increases in the cost of deposit funds and yields on alternative assets. With mortgage rates already at levels that have begun to choke off demand, new commitment activity for longer-term residential mortgages at thrift institutions would probably become quite depressed. (13) The further rise in interest rates under alternative B--the underlying assumption for the Greenbook projection-is an element in the staff's anticipation that real GNP will decline in early 1981. The dampening of the transactions demand for money in lagged response to the run-up in interest rates and to the projected weakening in economic activity suggest that interest rates could temporarily ease in early 1981, assuming 1981 monetary targets as reported to the Congress in July.1 / However, for all of next year, the effects of inflation on the transactions demand for money are expected to require historically high interest rates in order to restrain growth in the monetary aggregates to the preliminary FOMC targets. (14) Alternative A encompasses somewhat higher money targets for the fourth quarter than alternative achievable with little B--targets that are thought to be change in interest rates from current levels. Assuming a level of member bank borrowing of around $1½ billion, nonborrowed and total reserves under this alternative would be expected to increase at annual rates of 4 and 7 percent, respectively, over the October to December period, and the federal funds rate may be around the 14 to 15 percent area. Other market interest rates also would be expected current levels. 1/ However, to remain at about their some short-term rates might adjust up slightly See Appendix II for the projected quarterly pattern of interest rates under alternative B. -12- further due to the strength in short-term credit demands and, in the case of the prime and mortgage rates, to lagged adjustments to the tightening that has already occurred. With interest rates lower over the balance of the year than under alternative B, money growth and economic activity would be expected to be less weak in early 1981. (15) Alternative C contemplates a reduction in the Committee's current fourth quarter money growth target, and implies a substantial reduction in money growth over the balance of the year that brings the level of M-1B into the FOMC's target zone by December. To achieve the alternative C specifications would probably require a reduction in nonborrowed reserves at about a 5 percent annual rate over the last two months of the year, if a borrowing level of $2 billion, or a bit higher, is assumed. The funds rate may move up to around the 16 to 17 percent area over the next few weeks, and possibly higher by year-end. This alternative increases the risk of a more significant drop-off in money growth and economic activity in early 1981, and consequently increases the likelihood that interest rates will be lower in the first quarter of the year than under the other two alternatives. alternative, However, the staff would anticipate that, even under this interest rates over the next year would still have to be high by historical standards to constrain money growth to the Committee's preliminary targets. -13Directive language (16) Given below are suggested operational paragraphs for the directive consistent with the form of the directive adopted at the October meeting. The language continues to call for expansion of reserve aggregates at a pace consistent with the desired rate of monetary growth over the last three months of the year, provided that the weekly average federal funds rate remains within a specified range. The specifi- cations adopted at the October meeting are shown in strike-through form. In the short run, the Committee seeks behavior of reserve aggregates consistent with growth of M-1A, M-1B, and M-2 over the period] at annual rates of about PERIOD FROM September to December [DEL: 7¼]____ percent respectively, 5]____ percent, and [DEL: [DEL: 2½]____ percent, [DEL: [DEL: or somewhat less,] provided that in the period before the next regular meeting the weekly average federal funds rate remains within a range of [DEL: 9 to15]____ TO ____ If it percent. appears during the period before the next meeting that the constraint on the federal funds rate is inconsistent with the objective for the expansion of reserves, the Manager for Domestic Operations is promptly to notify the Chairman, who will then decide whether the situation calls for supplementary instructions from the Committee. Appendix I RESERVE TARGETS AND RELATED MEASURES FOR 4 WEEKS ENDED NOVEMBER 19 ($ millions, not seasonally adjusted) Targets for 4-Week Averages Non- Total Reserves (1) Projections_ for 4-week Averages ~ _..___ _ Total Required Excess Adjustment Reserves Reserves Reserves Borrowing (3) (4) (3)-(2) (5) borrowed Reserves (2) As of October 21 (EOMC Meeting) 40,325 41,625 1/ October 24 41,795 October 31 41,79540,495 2/3/ 2/3/ 41,420 40,020 2/4/ 2/4/ 41,445 39,995 November 7 14 41,625 41,400 225 1,300 42,004 41,779 225 1,509 191 1,501 280 1,619 387 1,750 1/ 40,495 41,805 41,996 2/ 41,358 41,639 2,/ 2/ 41,745 2/ 41,358 Total and nouborrowed reserves path adjusted upward by $170 million on October 24-, 1980 to account for changes in multiplier relationships. 2/ Targets and projections adjusted to reflect the impact of the implementation of the MCA on reserve aggregates in the week ending November 19. 3/ Total and nouborrowed reserves path adjusted upward by $400 million on November 7, 1980 to account for changes in multiplier relationships. In addition, the nonborrowed reserves path was further adjusted downward by $100 million because of the strength in total reserves. 4/ Total and nonborrowed reserves paths adjusted upward by $25 million to account for estimated impact on excess reserves of the implementation of MCA. In addition, the nonborrowed reserves path was adjusted downward by $50 million to adjust for strength in total reserves. 1/ APPENDIX II Interest Rates Consistent with the Greenbook GNP Forecast (percent) 3-month New Federal Treasury Aaa-Utility Mortgage funds bill Bond Commitment 1980--44 14% 13% 13% 14-3/8 1981--1 Q2 144 14 13 12% 134 13-3/8 144 14% Q3 144 13% 13-3/8 Q4 15 14 134 Conventional 14% 14-3/8 NOTE: These rate projections are based on the assumption that M-LA will grow 5 percent in 1980 (consistent with Bluebook alternative B), and 4% percent in 1981 abstracting from the impact of nationwide NOW/ATS accounts. Such growth would imply M-LA velocity increases in the two years of 4 and The Board's quarterly econometric model indicates 5% percent, respectively. that historical money demand relationships would require roughly 34 percentage points greater growth of M-lA in 1981 to achieve the GNP and interest rates in the staff's judgmental Greenbook projection. Thus, these interest rate projections assume a further so-called downward shift in money demand as judged from the prediction error in the Board's model. STRICTLY CONFIDENTIAL (FR) CLASS II - FOMC TABLE 1 SELECTED INTEREST RATES (Percent) Short-term CDs T y Bl Secondary reasury ill Market Auction Market 3-mo 6-mo 1-yr 3-mo (5) (4) (3) (2) F l eriod ederal (1) Comm. Paper 3-mo (6) (7) 3-yr (8) 10-yr (9) 30-yr (10) Long-term Corp.-Aaa Utility Recently New Offered Issue (12) (11) U.S. Govt. Constant Maturity Yields Bank Prime Rate Municipal Bond Buyer (13) Home Mortgages Secondary market Primary GNMA FNMA Conv. Sec. Auc. (16) (15) (14) 1979--High Low 15.61 9.93 12.60 8.85 11.89 8.64 12.65 8.87 14.53 9.84 14.26 9.66 15.75 11.50 11.68 8.76 10.87 8.79 10.42 8.82 11.50 9.40 11.45 9.39 7.38 6.08 12.90 10.38 13.29 10.42 11.77 9.51 1980--High Low 19.39 8.68 15.61 6.49 14.39 7.18 15.70 6.66 18.04 8.17 17.60 7.97 20.00 11.00 14.29 8.61 13.33 9.51 12.73 9.54 14.22 10.53 14.12 10.79 9.64 7.11 16.35 12.18 15.93 12.28 14.17 10.73 1979--Oct. Nov. Dec. 13.77 13.18 13.78 11.70 11.79 12.04 11.23 11.22 10.92 11.34 11.86 11.85 13.66 13.90 13.43 13.23 13.57 13.24 14.39 15.55 15.30 10.95 11.18 10.71 10.30 10.65 10.39 9.85 10.30 10.12 10.97 11.42 11.25 10.91 11.36 11.33 7.08 7.30 7.22 11.63 12.83 12.90 12.52 12.75 12.49 11.25 11.57 11.35 1980--Jan. Feb. Mar. 13.82 14.13 17.19 12.00 12.86 15.20 10.96 12.46 14.03 11.85 12.72 15.10 13.39 14.30 17.57 13.04 13.78 16.81 15.25 15.63 18.31 10.88 12.84 14.05 10.80 12.41 12.75 10.60 12.13 12.34 11.73 13.57 14.00 11.77 13.35 13.90 7.35 8.16 9.17 12.88 13.03 15.28 12.91 14.49 15.64 11.94 13.16 13.79 Apr. May June 17.61 10.98 9.47 13.20 8.58 7.07 11.97 8.66 7.54 13.62 9.15 7.22 16.14 9.79 8.49 15.78 9.49 8.27 19.77 16.57 12.63 12.02 9.44 8.92 11.47 10.18 9.78 11.40 10.36 9.81 12.90 11.53 10.96 12.91 11.64 11.00 8.63 7.59 7.63 16.33 14.26 12.71 14.61 12.88 12.35 12.64 11.30 11.07 July Aug. Sept. 9.03 9.61 10.87 8.06 9.13 10.27 8.00 9.39 10.48 8.10 9.44 10.55 8.65 9.91 11.29 8.41 9.57 10.97 11.48 11.12 12.23 9.27 10.63 11.57 10.25 11.10 11.51 10.24 11.00 11.34 11.60 12.32 12.74 11.41 12.31 12.72 8.13 8.67 8.94 12.19 12.56 13.20 12.66 13.92 14.77 11.53 12.34 12.84 Oct. 12.81 11.62 11.30 11.57 12.94 12.52 13.79 12.01 11.75 11.59 13.18 13.13 9.11 13.79 14.95 12.91 1980--Sept.3 10 17 24 10.47 10.22 10.64 10.85 9.97 9.92 10.29 10.25 10.08 9.97 10.50 10.66 10.25 10.23 10.88 10.82 10.93 10.76 11.25 11.24 10.61 10.40 10.86 10.97 11.50 11.71 12.21 12.46 11.28 11.00 11.61 11.85 11.46 11.20 11.48 11.61 11.18 11.06 11.29 11.45 12.34 12.60 8.78 8.82 8.98 9.18 13.03 13.08 13.25 13.43 14.41 13.10 12.42 12.48 12.78 13.03 12.57 12.59 12.74 12.93 Oct. 1 8 15 22 29 12.38 12.59 12.64 12.55 13.17 11.05 11.34 11.12 11.39 12.17 11.19 10.93 10.84 11.16 11.82 11.72 11.14 11.28 11.41 12.28 12.35 12.52 12.49 12.68 13.51 12.12 12.18 12.25 12.26 12.92 13.00 13.50 13.50 13.93 14.07 12.16 11.60 11.58 11.91 12.51 11.92 11.50 11.37 11.66 12.10 11.76 11.39 11.19 11.48 11.92 13.08 13.02 12.62 13.21 13.92 13.06 12.87 12.85 13.03 13,79 9.22 9.01 8.81 9.06 9.45 13.60 13.73 13.78 13.85 14.00 15.30 15.30 13.35 12.70 12.59 12.98 13.35 Nov. 5 12 13.99 14.65 12.96 13.30 12.41 12.32 13.27 13.23 14.43 15.17 13.81 14.80 14.50 15.50 13.07 13.18 12.50 12.74 12.27 12.54 13.97 69 13. p 9.64 9.50 14.08 n.a. -15.57 13.42 13.61 15.35 14.00 13.50 13.09 12.61 12.05 15.31 14.82 14.82 14.32 15.50 15.50 13.49 12.80 13.04 12.49 12.59 12.23 Daily--Nov. 6 13 -- - 14.60 14.60 data in column 4 are average rates set in Lhe NOTE: Weekly data for columns 1, 2, 3, and 5 through 10 are statement week averages of daily data. Weekly column 11, the weekly date is the mid-point ot auction of 6-month bills that will be issued on the Thursday following the end of the statement week. For Thursday, respectively, following the end of the statethe calendar week over which data are averaged. Columns 12 and 13 are 1-day quotes for Friday and mortgages with 80 percent loan-to-value ratios made first conventional for commitments on rates interest contract of average an is 14 ment week. Column week. The FNMA auction yield is the average yield statement the of end the following by a sample of insured savings and loan associations on the Friday 7, 1980, figures exclude graduated payment in a bi-weekly auction for short-term forward commitments for government underwritten mortgages; beginning July delivery, assuming prepayment in 12 years on pools immediate for securities mortgage-backed on investors to yields net average are yields GNMA mortgages. of 30-year FHA/VA mortgages carrying the coupon rate 50 basis points below the current FIA/VA ceiling. STRICTLY CONFIDENTIAL (FR) TABLE 2 NET CHANGES IN SYSTEM HOLDINGS OF SECURITIES 1/ (Hillions of dollars, not seasonally adjusted) Treasury Coupons Net Purchases 3/ Treasury Bills Net Change 2/ Withn 1-year 1 -5 5 - 10 Over 10 otal 1975 1976 1977 1978 1979 -468 863 4,361 870 6,243 337 472 517 1,184 603 3,284 3,025 2,833 4,188 3,456 1,510 1,048 758 1,526 523 1,070 642 553 1,063 454 6,202 5,187 4,660 7,962 5,035 1979--Qtr. III IV 5,363 4,164 395 118 1,289 1,101 310 51 2,302 1,351 1980--Qtr. I II III -2,945 3,249 -3,298 292, 110 8 137 355. 1,516541 81 410 320 836 2,395 1,234 1980--Hay June 606 322 155 -153' 405 738- 216 129 909 878 July -3,214 -47 -37 Aug. Sept. Oct. 1980--Sept.3 10 17 24 Oct. 1 8 15 22 29 Nov. 5 12 19 26 LEVEL--Nov. 12 (in billions) 133 164 " wi thl 1 year 191 CLASS L II - FOMC '" Federal Agencies 1 - 5 288 5 - 10 Over 10 3 -- - Iet Total 1,613 891 1,433 127 454 7,267 6,227 10,035 8,724 10,290 Tocal 5/ 8,129 / 4,839- 482 - - 1,272 3,607 -2,892 -1,774 -2,597 -2,019 -3,801 - -2,157 362 2,373 -1,381 - 1,515 1,198 4,655 -1,271 - -3,216 1,187 -128 -1,307 -985 911 261 1,267 -2,114 668 6,307 - 1,234 I Ltiange Outright Holdings Net Purchases 4/ -- -241 -- -237 100 100 -328 -100 S 100 1,200 717 2,072 -3 -402 -18 -648 -486 2,914 -6,052 2,287 1,364 1,043 -1,929 ---- -- -402 648 -486 -1,100 45.7 - 11.4 36.2 75.5 2.2 4.8 1.1 0.7 8.8 -1,100 130.0 ----116 -1,812 -2,2 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. 5/ In addition to the net purchases of securities, also reflect 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 (+). Z/ On October 1, 1979, 4668 million of maturing 2- and 4-year notes were exchanged for a like amount of short-term bills, because the note auctions were delayed. On October 9 and 10, the bills were exchanged for new 2- and 4-year notes, respectively. 8/ Maturing 2-year notes were exchanged on June 2, 1980,. for special 2-day bills. At their maturity the bills were exchanged for new 2-year notes. STRICTLY CONFIDENTIAL (FR) TABLE 3 SECURITY DEALER POSITIONS AND BANK POSITIONS (Millions of dollars) U.S. Govt. Security Dealer Positions Bills Coupon S Issues Underwriting Syndicate Positions Corporate Municipal Bonds Bonds CLASS II - FOMC Member Bank Reserve Positions Excess** Borrowing at FRB** Reserves Total Seasonal Special 1979--High Low 8,091 138 902 -2,569 283 0 726 -122 2,960 628 1980--High Low 8,838 1,972 2,263 -1,482 299 0 1,080p -228p 3,439 1979--Oct. Nov. Dec. 2,289 4,427 5,760 -1,576 -514 -1,901 75 17 34 272 244 441 1980--Jan. Feb. Mar. 4,380 2,937 2,964 -944 -212 -659 42 3 37 Apr. May June 7,838 4,008 3,724 167 1,372 1,429 July Aug. Sept. 4,581 5,108 3,681 Adjustment 2,866 510 177 5p 3,298 12 2,023 1,911 1,473 155 140 81 1,863 1,763 1,390 251 211 186 1,241 1,644 2,823 74 97 150 1,167 1,558 2,575 48 69 112 197 178 203 2,455 1,018 379 155 63 12 1,748 212 61 634 798 -416 154 91 24 284 296 264p 395 658 1,311 6 9 25 136 408 1,253 *2,447 *143 14 1980--Sept.3 10 17 24 4,274 3,988 4,404 3,112 170 -279 -814 -268 3 15 78 45 Oct. 1 8 15 22 29 2,601 2,042 2,726 *2,470 *2,433 -517 "113 164 *-50 *728 Nov. 5 12 19 26 *2,694 *3,072 *-128 *1,005 Oct. 22 215 p 1,310p 1,2 4 4p 489p 239p 80 4 p 54 p 1,348 594 1,213 1,630 1,130 523 1,192 1,354 0 0 52 7 11 378 p 39 4 p 213p 68p 81p 1,873 1,248 1,10 7 p 1,203p 1,44(p 1,833 1,200 1,0 4 6 p 1,134 p 1,353p 0 56 7p 5 74 p 1,8 78 p 1,80 6 p 2 1,9 7 1p 20p 1p 6 ,0 7p NOTE: Government security dealer trading positions are on a commitment basis. Trading positions, whih exclude Treasury securities financed by repurchase agreements maturing in 16 days or more, are indicators of holdings available for sale over the near term. Underwriting syndicate positions consist of issues in syndicate, excluding trading positions. Weekly data are daily averages for statement weeks, except for corporate and municipal issues in syndicate, which are Friday figures. ** Strictly Confidential. ** Monthly averages for excess reserves and borrowing are weighted averages of statement week figures.
@FedFRASER