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Strictly Confidential (FR) Class I FOMC November 2, 1984 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 2, 1984 MONETARY POLICY ALTERNATIVES Recent developments (1) Preliminary data for October indicate that M1 declined last month at an annual rate of around 6-1/2 percent, following growth in September that turned out to be 4-3/4 percent (or about 2 percentage points less than expected at the time of the previous FOMC meeting). The estimated level of M1 in October was well below the growth path adopted at the last FOMC meeting for the September-December period and in the lower half of its longer-run target range. Both demand deposits and other checkable deposits were drawn down last month, while currency continued to grow at a slower pace than in the first half of the year. (2) The nontransactions component of M2 grew a bit faster in October than the advanced September pace, boosted particularly by strength- ened inflows to MMDAs and money market funds, whose yields lagged declines in short-term market rates. But with the drop in M1, growth of M2 for October is estimated to have been around 6 percent, somewhat below the Committee's three-month objective of 7-1/2 percent. M3 growth, on the other hand, appears to have picked up in October to a 10-1/2 percent annual rate, somewhat above the Committee's short-run path. CD issuance strengthened considerably in October, as the runoff at the thrift subsidiary of FCA stopped and as banks stepped up sales of CDs in part to offset declining Treasury deposits; in addition, institution-only money market funds expanded by a very substantial amount. KEY MONETARY POLICY AGGREGATES (Seasonally adjusted annual rates of growth) Aug. Sept. Oct.pe QIV to Oct. pe Money and Credit Aggregates M1 2.0 -6.6 4.7 M2 5.9 6.8 M3 10.5 9.3 Domestic nonfinancial debt 14.0 Bank credit 11.2 6.9 Reserve Measures1 Nonborrowed reserves 2 -3.0 -16.0 4.4 Total reserves -8.9 -13.2 4.6 2.9 7.1 Monetary base Memo: 7.6 -. 3 (Millions of dollars) Adjustment and seasonal borrowing 974 849 Excess reserves 683 6293 1. 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. 2. Includes "other extended credit" from the Federal Reserve. 3. Average through October 24 reserve maintenance period. pe-preliminary estimate. Note: Monthly reserve measures, including excess reserves and borrowing, are calculated by prorating averages for 2-week reserve maintenance periods that overlap months. -3(3) Expansion of the debt of private domestic sectors moderated further in September to an estimated annual rate of 11-1/2 percent, and with borrowing by the federal sector temporarily slowing at the same time, growth in total nonfinancial debt fell to 11-1/4 percent from over 13 percent in the previous two months. At banks, a slackening in the pace of consumer lending and slower growth in business borrowing, as merger financing dropped off and declines in bond yields encouraged greater reliance on long-term finance, contributed to a moderation in credit growth. Partial data for October suggest some additional slowing in bank credit, but with bond issuance by business and state and local governments strengthening considerably further and Treasury borrowing rebounding, total credit growth probably was at least as rapid as in September. (4) Total reserves fell at about a 13 percent annual rate in October, reflecting a decline in required reserves mainly in response to the weakness in transactions deposits in October and the runoff of CDs in September. sharply. Nonborrowed reserves plus extended credit also declined Use of the discount window was especially heavy early in each of the two maintenance periods ending in October, particularly by large banks, which appear to have become more willing to borrow after the increasingly cautious approach that had developed since last spring. Adjustment plus seasonal borrowing averaged $762 million over the four Wednesday-ending weeks since the last Committee meeting. A level of borrowing of $700 million most recently has been assumed in constructing the reserve paths. (5) The greater willingness of banks to use discount window credit, market expectations of monetary easing as M1 weakened, and a drop in other short-term rates contributed to a decline in the federal funds rate from around 11 percent just before the October FOMC meeting to the neighborhood of 10 percent most recently; funds traded below that level on a number of days in the latter part of October. Rates on Treasury bills have dropped about 120 basis points and on short-term private instruments by 125 to 150 basis points during the intermeeting period, bringing the 3-month bank CD rate to about 9-1/2 percent; most major banks reduced their prime rates to 12 percent late in October. Treasury and corporate bond yields have declined by about 80 basis points, responding as well to the apparently improved outlook for inflation from the weakness in oil prices and to information suggesting a more moderate pace of economic activity. (6) Exchange market conditions were fairly volatile over the period since the last Committee meeting. percent on balance, The dollar has dropped about 2-1/2 after first rising to a new record high in mid-October. The Desk intervened on one day in the period, selling $95 million. Prospective developments (7) The table below gives two alternative specifications for growth in the monetary aggregates over the period from September to December, along with associated federal funds rate ranges. (More detailed data, in- cluding implied growth for the QIV 1983-to-QIV 1984 period and for October through December, can be found on the table and charts on the following pages.) Given the substantial weakness of M1 in October, both alternatives contemplate growth in this aggregate over the three-month September-to-December period well below the short-run objective specified by the Committee at its last meeting, but growth of M2 and M3 would be expected to be near their short-run objectives. Alternative A involves an initial easing in bank reserve positions, while no substantial change is contemplated by alternative B. No alternative that would initially tighten bank reserve positions is presented in view of the size of recent shortfalls in M1 and M2, with both aggregates now in the lower halves of their ranges for 1984. MEMO: Current FOMC specifications Alt. A Alt. B 3-1/2 7-1/2 9-1/2 2-1/2 7 9-1/4 6 7-1/2 9 8 to 12 8 to 12 Growth from September to December M1 M2 M3 Federal funds rate range (8) 7 to 11 Under alternative B, M1 is expected to grow fairly rapidly over the last two months of the quarter-at about a 7 percent annual rate. Some of the unusual factors that depressed M1 in October-such as the possible pull of relatively high-yielding MMDA accounts on funds that Alternative Levels and Growth Rates for Key Monetary Aggregates Monthly Levels 1984--July August September October November December Alt. A Alt. B Alt. A Alt. B Alt. A Alt. B ------ ------ ------ ------ ------ ------ 545.8 546.7 548.9 545.8 546.7 548.9 2281.8 2290.9 2306.4 2281.8 2290.9 2306.4 2860.4 2872.0 2891.0 2860.4 2872.0 2891.0 545.9 549.4 553.7 545.9 549.1 552.3 2317.7 2333.2 2349.6 2317.7 2332.1 2346.6 2916.3 2937.7 2960.0 2916.3 2937.3 2958.3 -1.3 2.0 4.8 -1.3 2.0 4.8 5.1 4.8 8.1 5.1 4.8 8.1 8.8 4.9 7.9 8.8 4.9 7.9 -6.6 7.7 9.4 -6.6 7.0 7.0 5.9 8.0 8.4 5.9 7.5 7.5 10.5 8.8 9.1 10.5 8.6 8.6 1.8 3.5 8.6 1.8 2.5 7.1 6.0 7.5 8.3 6.0 7.0 7.5 7.2 9.5 9.0 7.2 9.3 8.6 7.2 6.2 4.5 1.9 7.2 6.2 4.5 1.5 6.9 6.9 6.2 7.1 6.9 6.9 6.2 6.8 8.9 10.3 8.2 8.8 8.9 10.3 8.2 8.7 5.8 4.7 5.0 5.8 4.7 4.9 6.8 6.8 6.9 6.8 6.8 6.9 9.1 9.3 9.4 9.1 9.3 9.3 Growth Rates Monthly 1984--July August September October November December 1984 June to Sept. 1984 Sept. to Dec. 1984 Oct. to Dec. Growth Rates Quarterly Average 1984--Q1 Q2 Q3 Q4 Memo: '83 Q4 to Sept.'84 '83 Q4 to Oct. '84 '83 Q4 to '84 Q4 Chart 1 CONFIDENTIAL (FR) CLASS II FOMC Actual and Targeted M1 Billions of dollars 1570 / 8% -- ACTUAL LEVELS ESTIMATED LEVELS * SHORT RUN ALTERNATIVES - 560 7, -1 550 - 540 -- 530 -- 520 -J510 I O I N 1983 I D J I F I M I A I M I J 1984 I I J A I S I O I N D Chart 2 CONFIDENTIAL CLASS II FOMC (FR) Actual and Targeted M2 Billions of dollars 1 * AAA 9% - -- ACTUAL LEVELS ESTIMATED LEVELS SSHORT RUN ALTERNATIVES / / 2380 / 2360 2340 // 76 2320 2300 2280 7 • 2260 2240 2220 2200 2180 I O I I N 1983 D J I F I M I A I M J I J 1984 I A I S I O I N 2160 D CONFIDENTIAL (FR) Chart 3 CLASS II FOMC Actual and Targeted M3 Billions of dollars *A- *B- 2960 --- ACTUAL LEVELS ESTIMATED LEVELS SSHORT RUN ALTERNATIVES /9% 2940 - 2920 / // // 2900 / 2880 /V- S2860 / -2840 S2820 / -2800 2780 S- S2760 S- 2740 2720 -2700 -2680 -2660 I 11 o N 1983 D J 1I F M A I M J J 1984 I A I 2640 might have otherwise gone into transactions balances and possible shifts out of cash into longer-term market instruments as expectations of declining rates became more widespread--are expected to abate. Moreover, demand for this aggregate will be boosted over coming months by increases in nominal income and spending and by the usual lagged effects of the sizable declines in short-term interest rates since early September. The expected pickup in M1 growth in November and December would yield only about a 2-1/2 percent annual growth rate over the last three months of the year and only 1-1/2 percent on a quarterly average basis. as a whole (QIV to QIV), (9) For the year M1 growth would be around 5 percent. Assuming GNP grows as projected in the Green Book for the fourth quarter, the velocity of M1 would rise by about 5-3/4 percent at an annual rate in that period. appears unusual, Such a relatively rapid rise in velocity looking back over previous experience for periods when interest rates have dropped. In part, it reflects the shifts out of cash that have already occurred. But still, such a large implied velocity growth does raise questions about whether the actual outcome might instead involve more money growth and/or less GNP expansion, given the interest rates contemplated in this alternative. (10) The pickup in M1 growth is expected to lead to more rapid expansion in M2 over the balance of the quarter. For the quarter as a whole, M2 should grow about in line with nominal GNP, bringing its growth for the year to around 7 percent, somewhat below the mid-point of its longer-term range. M3 is expected to increase in November and December at somewhat less than its October pace, in part as yields on institution-only money funds adjust to market rates; growth for the year would be a bit above the upper end of the Comittee's longer-run range. Outstanding CDs at banks are expected to grow at a moderate rate over the balance of the year, with expansion restrained in part by efforts of a number of larger banks to manage their balance sheets more conservatively in the wake of the summer's banking difficulties and issuance of proposed new capital guidelines. (11) Credit is projected to expand more slowly in the fourth quarter than in the third, owing entirely to a drop-off in private borrowing, while federal government borrowing is expected to be substantially stronger in the current quarter than during the summer. Business borrowing for mergers and the like is expected to continue to decline, and needs for credit to fund outlays may edge lower from the third quarter pace as inventory accumulation slows. In the household sector mortgage takedowns should continue to slow, as housing expenditures weaken a little further in reflection of the increase in interest rates earlier this year. Consumer credit will probably continue to expand at a pace well below the extraordinary rate of earlier this year. (12) The aggregate specifications of alternative B are thought to involve pressures on bank reserve positions indexed by discount window borrowing of around $700 million. This is expected to be associated with a federal funds rate averaging around 10 percent, given the apparent considerable diminution in banks' reluctance to borrow over recent weeks and also assuming that the "frictiona l " level of borrowing is, at $300 to $400 million, somewhat higher than usual. Such an assumption for "frictional" borrowing appears consistent with the recent sustained level of seasonal borrowing at an unusually large $300 million. After declining sharply in October, nonborrowed and total reserves would be expected to expand at annual rates of around 9 and 6 percent, respectively, over the last two months of the year. (13) Interest rates are not likely to change substantially under this alternative, although they could back up somewhat from current levels, given apparent expectations in the market of a further easing in pressures on bank reserve positions. The 3-month bill rate may be in a 8-7/8 to 9-3/8 percent range, probably moving into the upper part of that range if funds trade persistently around 10 percent. Long-term markets, too, remain sensitive to expectations about the near-term stance of monetary policy, as well as to incoming data on inflation and economic activity. The pressure of credit demands on longer-term markets may moderate, though, as the effects of the previous relatively steep declines in rates on corporate and state and local issuance wear off. (14) Alternative A contemplates a more expansive reserve posture that would encourage more rapid growth in M1 and M2. Growth of M1 over the last two months of the year would be anticipated to be around 8-1/2 percent, encouraged by growth of nonborrowed reserves at a 15 percent annual rate. Over the three-month September-to-December period, M1 would expand at a 3-1/2 percent annual rate and M2 at a 7-1/2 percent rate-still objectives set at the last meeting for M1 but on target for M2. below Growth of M3 may turn out to be somewhat further above the currently specified 3-month growth rate, as an additional easing of market conditions encourages credit expansion. (15) The behavior of monetary aggregates and aggregate re- serves under alternative A is expected to be consistent with borrowing at the discount window of around $400 million, near the currently estimated "frictional" level. The federal funds rate would decline to close -10- to the 9 percent discount rate, probably just above it. Other interest rates, both short- and long-term, would decline sharply, with the 3-month Treasury bill rate falling to the 8-1/4 to 8-3/4 percent area; the dollar would probably decline substantially further on exchange markets. tions of a discount rate cut would become widespread. bond issuance would be enlarged, Expecta- In credit markets, and mortgage commitments and borrowing could begin to pick up in late fall and winter in response to the lower rates and the greater willingness of thrifts to supply credit aggressively as their financial condition improved. The decline in rates in November and December would tend to boost money demand in 1985 both through its direct effect on opportunity costs and indirectly by fostering somewhat faster growth of income and credit demands than currently projected. This would increase the odds of some backup in rates in the first part of next year in the process of restraining money growth to around the midpoints of the Committee's tentative long-run ranges for 1985. -11- Directive language (16) Two alternative operational paragraphs for the directive are given below. Alternative I represents the current paragraph, with updating modifications (shown in the usual way). This approach involves a potential drawback that, based on the staff's current estimates of relationships, the directive would specify an M1 growth for the fourth quarter that is well below the previously adopted target. That drawback might be avoided by showing M1 as a range, possibly encompassing the previous decision. A second possibility would be to show a growth rate for M1 near that of the earlier decision-which, however, would tilt the directive toward ease over the intermeeting period (if staff estimates are near correct). The language under alternative II partially restructures the existing directive as another approach to resolving the difficulties. ALTERNATIVE I In the implementation of policy in the short run, the Committee seeks to DECREASE SOMEWHAT (alt. A) /maintain (alt. B) EXISTING PRESSURES [DEL: the weeks. of degree lesser sought in recent] restraint] on reserve positions [DEL: This action is expected to be consistent with growth of M1, M2, 9]____percent during 6] ____, [DEL: 7-1/2], ____and [DEL: and M3 at annual rates of around [DEL: A somewhat further lessening of] the period from September to December. [DEL: LESSER restraint on reserve positions would be acceptable in the event of significantly slower growth in the monetary aggregates, evaluated in relation to the strength of the business expansion and inflationary pressures, domestic and international financial market conditions, and -12- the rate of credit growth. Conversely, greater restraint might be acceptable in the event of substantially more rapid monetary growth and indications of significant strengthening of economic activity and inflationary pressures. 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 persistently outside a range of [DEL: 8 to12] ____ TO ____ percent. ALTERNATIVE II In the implementation of policy in the short-run, the Committee seeks to decrease somewhat (alt. A) /maintain (alt. B) existing pressures on reserve positions. This action is expected to be consistent with growth of M1 at around ____percent at an annual rate over the last two months of the year; more rapid growth would be acceptable in view of the substantial decline of M1 in October which brought that aggregate into the bottom half of its long-run range. Growth of M2 and M3 is expected to be generally consistent with the 7-1/2 and 9 percent growth paths for the September-to-December period set at the last Committee meeting. Lesser restraint on reserve positions would be acceptable in the event of significantly slower growth in the monetary aggregates, evaluated in relation to the strength of the business expansion and inflationary pressures, domestic and international financial market conditions, and the rate of credit growth. Conversely, greater restraint might be acceptable in the event of substantially more rapid monetary growth and indications of significant strengthening of economic activity and inflationary pressures. The Chairman may call for Committee consultation if it appears to the -13Manager 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: 8 to 12]____ TO ____ percent. Selected Interest Rates November Percent 5, 1984 Lon -Term U.S government constant maturity yields 3_yea 1_ye6r 30-y ear O 10 11 copoate A ultlty recently munl cipal Bond conne tlon l 12 13 14 home moiga FHA/VA celing FNMA I year ARM _15 1 1983--High LOW 10.21 6.42 9.49 7.63 9.64 7.72 9.79 7.82 9.93 8.15 9.85 8.01 8.79 1.71 11.50 10.50 11.57 9.40 12.14 10.18 12.11 10.32 13.42 11.64 10.56 9.21 13.89 12.55 13.50 11.50 12.50 10.49 1984--High Lou 11.77 9.41 10.65 8.84 10.76 8.94 11.09 9.01 11.71 9.35 11.35 9.16 10.72 8.70 11.00 11.00 13.44 10.87 13.84 11.62 13.81 11.69 15.30 12.83 11.44 9.86 14.68 13.19 14.00 12.50 13.70 11.25 1983--Oct. Nov. Dec. 9.48 9.34 9.47 8.64 8.76 9.00 8.83 8.93 9.17 8.98 9.08 9.24 9.18 9.36 9.69 9.03 9.10 9.56 8.67 8.55 8.69 11.00 11.00 11.00 10.87 10.96 11.13 11.54 11.69 11.83 11.58 11.75 11.88 12.89 13.14 13.29 10.14 10.22 10.40 13.54 13.44 13.42 13.00 12.50 12.50 11.40 11.40 11.56 1984--Jan. Feb. eNr. 9.56 9.59 9.91 8.90 9.09 9.52 9.02 9.18 9.66 9.07 9.20 9.67 9.42 9.54 10.08 9.21 9.35 9.81 8.80 8.72 8.91 11.00 11.00 11.21 10.93 11.05 11.59 11.67 11.84 12.12 11.75 11.95 12.38 12.99 13.05 13.63 10.03 10.00 10.37 13.37 13.23 13.39 12.50 12.50 12.70 11.45 11.38 11.91 Apr. HKey June 10.29 10.32 11.06 9.69 9.83 9.87 9.84 10.31 10.51 9.95 10.57 10.93 10.41 11.11 11.34 10.17 10.38 10.82 9.29 9.52 9.92 11.93 12.39 12.60 11.98 12.75 13.18 12.63 13.41 13.56 12.65 13.43 13.44 13.96 14.79 15.00 10.26 10.88 11.07 13.65 13.94 14.42 13.00 13.94 14.00 12.10 12.83 13.45 July Aug. Sept. 11.23 11.64 11.30 10.12 10.47 10.37 10.52 10.61 10.47 10.89 10.71 10.51 11.56 11.47 11.29 11.06 11.19 11.11 10.30 10.58 10.62 11.00 11.00 12.97 13.08 12.50 12.34 13.36 12.72 12.52 13.21 12.54 12.29 14.93 14.12 13.86 10.84 10.40 10.54 14.67 14.47 14.35 14.00 13.70 13.50 13.59 13.27 13.15 Oct. 9.99 9.74 9.87 9.93 10.38 10.05 10. 12.58 11.85 12.16 11.98 10.77 14.13 13.38 12.58 12.72 12.48 12.44 12.45 12.54 12.92 12.69 12.69 12.67 12.76 12.89 12.65 12.51 12.43 12.53 14.10 14.08 14.16 14.13 14.15 10.39 10.29 10.47 10.30 10.45 14.68 14.54 14.39 14.36 14.38 14.00 14.00 13.50 13.50 13.50 11.35 1J.25 11.25 13.20 13.30 20 p iJ.12p 1984--Aug. I 8 15 22 29 11.53 11.59 11.63 11.77 11.50 10.34 10.49 10.36 10.37 10.58 10.60 10.63 10.53 10.54 10.68 10.73 10.72 10.64 10.65 10.78 11.18 11.41 11.43 11.51 11.50 10.99 11.06 11.15 11.26 11.27 10.44 10.55 10.55 10.62 10.60 13.00 13.00 13.00 1I.00 13.00 September 5 12 19 26 11.68 11.52 11.46 10.73 10.65 10.47 10.33 10.26 10.76 10.60 10.41 10.34 10.85 10.66 10.42 10.38 11.57 11.49 11.32 11.09 11.35 11.31 11.18 10.86 10.66 10.68 10.72 10.51 13.00 13.00 13.00 13.00 12.65 12.46 12.21 12.26 12.86 12.64 12.37 12.45 12.56 12.39 12.17 12.24 14.01 13.70 13.76 13.84 10.56 10.47 10.47 10.65 14.42 14.43 14.29 14.26 13.50 13.50 13.50 13.50 13.45 13.25 13.00 12.911 October 3 10 17 24 31 11.20 10.01 10.22 9.45 9.73 10.21 10.11 9.93 9.49 9.20 10.32 10.22 10.05 9.56 9.43 10.36 10.26 10.08 9.64 9.53 10.99 10.89 10.61 10.00 9.72 10.76 10.55 10.25 9.63 9.41 10.49 10.35 10.19 10.16 9.82 12.75 12.75 12.71 12.50 12.29 12.26 12.16 12.00 11.56 11.46 12.48 12.41 12.31 11.89 11.86 12.29 12.22 12.13 11.71 11.69 13.81 11.70 13.29 13.24 13.06p 10.88 10.93 10.71 10.54 10.62 14.18 14.19 14.10 14.05 13.85 13.50 13.50 13.50 13.00 13.00 12.90 12.75 12.60 12.20 11.90 Daily--Oct. Nov. 26 I 2 9.59 10.2' 10.15p 9.34 9.01 9.00 9.58 9.20 9.23 9.67 9.33 9.32 9.77 9.53 9.55 9.33 9.51 9.50 12.50 12.00 12.00 11.59 11.18 11.21p 11.99 11.66 11.67p 11.78 11.53 11.55p ---- are statement week averages. Dta In column 7 are laken from Donoghue's Money Fund Report Columns 12 and 13 se 1-day Quotes lor Friday and Thursday, respeclively rallos at a sample of savings and loan associations on the Friday following the end ol the statemenl week following the end ol the stalement week Column 13 is the Bond Buyt revenue index. Column 14 is an average ol contract interest tales on new commnment lor conventional lurst mortgages with a percent loanlto value posted by FNMA, on the Friday lollowing the end o the statement week. in ts purchase program lor adjuslable NOTE Weekly data for columns 1 through I Alter November 30. 193, column 15 trers only to VA-guaranleed loans Column 16 is the nlllial gross yield late ntome mortgages having ite and payment adjustments once a year FR136714184) Security Dealer Positions November 5, 1984 Millions of dollars Cash Posltions Cash.. SI P Treasury coupons Period Treasury bills i - under 1 year - over 1 year i-on federal agency Fra ---ad and Forward private short-term Fut u Treasury coupons under over 1 year I year Treasury bills i - i - Posiions e federal agency i -- . private short-term i 1983--High Low 20,858 -296 13,273 -3,461 1,579 -687 8,778 -3,148 12,088 4,013 17,005 8,839 1,654 -11,307 14 -95 -3,270 -907 -8,001 -4,411 -9,564 1984--High Low 21,963 5,107 13,695 -8,251 1,296 -1,038 3,069 -5,664 17,495 18,737 11,263 8,272 -13,048 22 -327 3,368 -933 -7,223 -10,622 5 12,475 1983--Oct. 14,672 15,981 18,172 9,694 10,762 8,653 609 934 1,165 3,390 325 -831 10,255 9,451 14,242 15,302 15,449 -9,132 -7,993 -5,549 -12 -2 -2 -1,667 -1,022 669 -5,909 -5,445 -7,354 -6,798 -6,331 -5,596 1984-- an. Feb. Mar. 12,472 9,287 15,936 10,815 9,658 4,619 1,083 949 811 667 -1,547 -2,626 11,398 12,532 16,151 12,788 13,349 12,764 -10,846 -8,774 -1,026 -15 -38 -10 -116 23 1,042 -7,474 -8,192 -9,552 -5,829 -8,673 -6,236 Apr. May June 14,408 14,159 16,484 2,929 -7,105 -2,631 -32 -291 -596 -1,643 -1,754 -3,248 16,649 16,849 15,996 13,065 12,525 14,457 -2,140 5,511 2,207 -13 -10 -21 476 345 1,448 -9,422 -9,676 -9,937 -5,462 -2,236 -1,191 July Aug. Sept. 12,374 11,542 17,984 21,965* -2,362 4,555 10,316 11,688* -604 -89 310 102* -3,393 -1,186 626 2,628* 16,040 16,098 14,063 13,146* 14,751 15,556 17,699 16,312* -2,516 -7,312 -9,772 -9,880* -89 -240 -122 -72 2,797 2,536 2,157 2,049* -9,650 -9,073 -8,332 -8,800* -2,599 -9,304 -8,960 -5,208* Nov. I)ec. Oct. 19H4--Aug. Sept. Oct. 11,086 11,568 1 8 15 22 29 14,424 15,156 12,612 7,605 10,099 2,776 4,537 5,258 5,282 -275 18 -101 -252 -42 -1,331 -2,758 153 -1,423 -948 15,791 17,338 15,841 14,497 16,423 14,673 15,526 15,466 15,556 15,503 -3,131 -2,847 -8,498 -9,858 -8,350 -147 -174 -225 -264 -327 3,368 2,875 2,045 1,910 3,107 -9,071 -9,858 -8,407 -8,483 -9,265 -5,454 -7,739 -8,201 -9,337 -11,273 5 12 19 26 13,790 13,384 18,379 21,963 8,322 9,780 11,025 10,052 173 490 481 80 -210 -262 -1,044 3,069 16,627 16,037 14,014 12,247 16,684 17,345 18,737 17,443 -8,669 -10,117 -9,891 -9,881 -209 -202 -77 -75 2,575 2,156 2,381 2,160 -9,334 -9,332 -8,044 -7,610 -13,295 -13,312 -9,203 -5,522 23,495 21,068* 20,030* 20,701* 24,283* 12,944 11,504* 11,962* 10,281 11,725* -36 23* -38* 136* 382* 11,688 12,816* 13,130* 13,647* 13,640* 17,206 15,192* 15,666* 16,335* 17,147* -8,698 -8,668* -10,371* -11,336* -9,748* 1,540 2,151* 2,277* 2,941* 1,064* -8,124 -9,478* -9,071* -8,473* -8,498* 3 10 17 24 31 ** 853 740* 943* 4,268* 5,605* NOTE Government securities dealer cash positions consist of securities already delivered, cor mitments 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 Cash plus forward plus futures positions In Treasury, federal agency, and private short-term securities SStrictly confidential 1 **LA s,. 1,516 h n 5 $500),00()1.10 -58 -54* -77* -77* -88* -3,821 -3,158* -4,385* -7,021* -6,946* STRICTLY CONFIDENTIAL (FR) CLASS II-FOMC Net Changes in System Holdings of Securities 1 Millions of dollars, not seasonally adjusted November 5, Treasury bills net change2 change Period 1979 1980 1981 1982 1983 1983--QTR. II III IV 1984--QTR. 1984 I II III Treasury coupons net purchases within 1-year 5-10 1-5 3 over 10 Federal agencies net purchases total within 1-year 10 510 1-5 1-5 6,243 -3,052 5,337 5,698 13,068 603 912 294 312 484 3,456 2,138 1,702 1,794 1,896 523 703 393 388 890 454 811 379 307 383 5,035 4,564 2,768 2,803 3,653 131 217 133 - 317 298 360 - 5,116 4,617 4,738 173 156 155 595 481 820 326 215 349 108 124 151 1,203 975 1,474 - -1,168 491 -424 -198 600 808 -- -300 200 - -277 -- -300 1,484 600 - 4 over over 10 Net change outright holdin s total total 1984 Net RPs 6 5 29 - -24 -- 454 668 494 -- 10,290 2,035 8,491 8,312 16,342 -2,597 2,462 684 1,461 -5,445 -- - -- --- 6,208 5,439 6,120 -793 9,412 -10,739 - -- -- -- -1,555 1,918 169 -286 70 1,982 May June -3,593 801 - - - - - - --- -- - - - -- - -3,633 786 -3,643 -3,572 July Aug. Sept. -1,497 -2,104 3,178 600 - -- - -- -- -- --- -- - --- - -1,499 -2,110 3,777 -656 4,951 -2,312 Oct. 2,993 -300 300 - - - - - - - - -3,007 -3,805 2,530 502 -5,699 5,828 -638 114 2,228 2,915 -4,573 1984--AUG. SEPT. OCT. LEVEL-NOV. -- -- - -- - -- - -- - -- -- - --- - - --- --- -- -- ---- -1,351 - 1,194 -272 -125 -700 1,950 589 328 569 600 - --- -600 --- -- --- -- - -- --- 1,950 588 328 1,169 -431 -1,078 -1,146 -615 207 -300 --- --300 -- --- -300 - ---- --- -- 300 ---- -_ --_ ------ -731 -1,087 -1,151 -615 507 -608 -3,925 4,133 -1,926 -165 14.8 19.4 86.5 2.5 4.4 1.2 .4 8.5 162.0 3,727 1 8 15 22 29 -1,346 -1,194 -272 -125 -700 5 12 19 26 3 10 17 24 31 1 67.0 18.7 33.7 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 ex change for maturing bills Excludes redemptions, maturity shifts, rollovers of maturing coupon issues, and direct Treasury borrowing from the System 4 Outright transdctions in market and with foreign accounts only Excludes redemptions and maturit shifts -- 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 Trea sury coupon issues 6 Includes changes in RPs (+), matched sale purchase transactions (-), and matched purchase sale transactions (+) FR 1'FR (71/1)
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