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(CONFIDENTIAL FR) October 12, 1973 MONETARY AGGREGATES AND MONEY MARKET CONDITIONS Prepared for the Federal Open Market Committee By the Staff BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM October 12, CONFIDENTIAL (FR) 1973 MONETARY AGGREGATES AND MONEY MARKET CONDITIONS Recent developments (1) Changes in RPD's and the monetary aggregates have fallen short of the Committee's September-October ranges of tolerance, the accompanying table shows. as In the case of M1, the net contraction already evident in August continued in September, perhaps in part because market participants moved out of cash into securities in interest rate declines. train for October. anticipation of A very slight decline also appears to be in Growth in M 2 was restrained mainly by the contraction in M 1 , as expansion in consumer-type time deposits at banks continued to be fairly strong. The largest shortfall relative to Committee targets was in RPD's; this was associated not only with weakness in M 1 but also to a great extent with the sharp recent declines in the outstanding amount of large CD's. Growth of Monetary Aggregates and RPD's in September-October Target Period Ranges of Reserves and Monetary Aggregates (Growth at SAAR in per cent) RPD's Tolerance Latest Estimates 15--18 5.0 0--4 M l M2 4.6 5--8 Memo: Fed funds rate (per cent per annum) Decision of 10/2/73 Decision of 10/10/73 -1.6 Statement week ave. 9-3/4--10-3/4 10-1/2 10--10-1/4 9/26 10/3 10/10 10.84 10.72 9.87 (2) the The adjusted credit proxy appears to be growing in September-October target period at only about a 3-1/2 per cent annual rate, the slowest two month pace since early 1970. Banks have been less eager to issue large CD's in light of the recent moderation in business loan expansion. There have also been market reports that large banks have come to prefer overnight Federal funds borrowing as compared with CD's, given recent expectations of declining short-term rates. (3) The recent shrinkage of M 1 and the reduced growth of other money and credit aggregates created market anticipations that System operations were likely to add to downward pressures on interest rates. For this reason market attention was closely riveted on the day-to-day pattern of Desk operations, especially their relationship to the prevailing level of the Federal funds rate. When Desk transactions appeared to indicate some willingness to supply reserves more aggressively, market interest rates declined sharply, particularly in the short-term sector. During the inter-meeting period short-term yields were off generally 100 to 150 basis points. Among key rates, the 90-day Treasury bill yield showed the largest decline, moving down from about 8.70 per cent at the time of the last meeting to an interim low of 6.94 per cent, and trading most recently at about 7.15 per cent. Bond yields characteristically have shown more moderate inter-meeting declines, ranging generally from 15 to 30 basis points. -3(4) By late September, incoming data began to indicate that all of the money and reserve aggregates were falling below the Committee's ranges of tolerance. At the same time, the Federal funds rate was tending above the 10-3/4 per cent upper limit of the Committee's range of tolerance. In these circumstances, the Desk moved against shortfalls in the aggregates through sizable reserve supplying operations. However, because market interest rates had already dropped sharply in anticipation of a policy modification, and in view of the provision in the directive to take account of financial market conditions, the Desk avoided overly aggressive actions for fear of further exacerbating the general rate decline. (5) sistencies in Since developing market circumstances had led to inconthe instructions under which the Manager was operating, a telephone meeting was held on October 2. The Committee directed the Manager to provide reserves at a pace consistent with an average Federal funds rate of 10-1/2 per cent. At a second telephone meeting on October 10, when more current data indicated a further shortfall in the money and reserve aggregates, the constraint on the Federal funds rate was relaxed, with the Manager directed to move in stages to 10-1/4 and then, if new data confirmed the weakness in the aggregates, to 10 per cent. As the two statement weeks of October, member money market eased in the first bank borrowings dropped to an average of about $1.4 billion, after averaging $1.9 billion in September. (6) Nonbank thrift institutions had a more favorable deposit experience in September as net outflows (seasonally unadjusted) slowed -4appreciably. In early October, preliminary data for large New York City savings banks show sizable net savings losses, but partial data for other savings banks and for savings and loan associations were more favorable. The combination of recent rate declines in securities markets and reduced concern about deposit outflows at thrift institutions has contributed on balance to a leveling off of mortgage rates. (7) The table on the next page shows (in percentage annual rates of change) selected monetary and financial flows over various recent time periods. Appendix Table III compares money supply growth rates computed on a quarterly-average basis with those computed on a last-month-of-quarter basis. -5Past 3 Calendar Years Dec. '73 over Dec. '69 Past 12 Months Sept. '73 over Sept. '72 Past 6 Months Sept. '73 over Mar. '73 Past 3 Months Sept. '73 over June '73 Past Month Sept.'73 over Aug. '73 Total reserves 8.4 11.8 8.1 10.3 8.5 Nonborrowed reserves 8.8 8.7 15.1 12.3 22.7 Reserves available to support private nonbank deposits 9.0 11.4 13.0 13.6 13.0 7.5 5.4 5.5 0.6 11.3 7.8 7.4 5.1 3.7 12.8 8.7 6.9 4.2 2.9 Total member bank deposits (bank credit proxy adj.) 10.7 13.1 11.6 10.6 5.7 Loans and investments of commercial banks 2/ 12.4 15.8 12.3 11.4 24.1 .9 2.4 2.5 3.3 0.8 0.1: 0.0 3/ 0.6- 1.3 Concepts of Money M1 (currency plus demand deposits) 1/ -1.4 M2 (Ml plus time deposits at commercial banks other than large CD's) M 3 (M2 plus deposits at thrift institutions) Bank Credit Short-term market paper (Monthly ave. change in billions) Large CD's Nonbank commercial paper 3/ 3/ 0.1 3/ 1/ Other than interbank and U.S. Government. 2/ Based on month-end figures. Includes loans sold to affiliates and branches. August last month for which data are-available. 3/ NOTE: All items are based on averages of daily figures, Except for data on total institulcans and investments of commercial banke, commercial paper, and thrift tions--which are derived from either end-of-month or last-Wednesday-of-month Growth rates for reserve measures in this and subsequent tables are figures. adjusted to remove the effect of disecctinuities from breaks in the series when reserve requirements are changed. Prospective developments (8) Three alternatives for Committee consideration summarized quarters at below include growth rates for M over the fourth and first 1 annual rates of 6-1/2 per cent per cent (alt. C). alt. 5 per cent (alt. A), B), and 3-1/2 As shown in the chart on the following page, the 6-1/2 per cent growth rate of alternative A returns M1 by March of next year to a long-run 5-1/4 per cent growth path (illustrated by the dashed line). The 5 per cent growth rate of alternative B brings M1 by March to a 4-1/2 per cent trend line (shown by the dotted line on the chart) that starts from the September money supply estimate available at the last Committee meeting. associated in This line represents the longer-run path the last Bluebook with the short-run targets adopted by the Committee at its September meeting. Alt. A Alt. B Alt. C Targets (4th & 1st qtrs. combined) Ml 6-1/2 5 3-1/2 M2 9 7 5-1/2 7 5-1/2 4 RPD 3-5 2-4 1-3 M 2-4 1-3 0-2 Credit proxy Associates ranges for October-November 1973 1 M2 Federal funds rate range (inter-meeting period) 1/ 5-1/2--7-1/2 8-10 5-7 4-1/2--6-1/2 8-3/4--10-1/4 9-1/2-10-1/2 The table on p.6a shows specifications in greater detail. MONEY SUPPLY AND LONGER RUN TARGET PATH RATIO SCALE, BILLIONS OF DOLLARS 1280 .,MA o 'I-- eoL l Ml LEVEL FOR SEPTEMBER EXPECTED AT 9/18 FOMC l ce > e -1270 n o • o~jeoe 41/2% M1 LEVEL FOR MARCH SEXPECTED AT 3/19 FOMC - 260 I . 51/4% GROWTH ,AOOJ i F I I M I I A I I M I J I 1973 I I I I J A I S S I I I I O 0 I N N J J F F 1974 M m A A 250 wv Alternative Longer-Run Targets for Key Monetary Aggregates M3 M __ B Alt. 1973 Sept. Oct. Nov. Dec. 1974 Mpr. Quarters: Alt. 263.6 263.3 264.8 267.0 272. Q 263.6 263.3 264.4 265.9 263.6 263.2 264. 1 265.2 270.0 C Alt. A 267.9 Alt. A Alt. 552.2 554.8 558.4 563.0 576.5 ) 552.2 554.8 557.9 561.3 572.1 Alt. C Alt. A 552.2 554.7 557.4 560.1 567.9 868,5 872.5 = 9 Alt. 868.5 872.3 Alt. 1 868.5 871.9 877.9 876.6 885.6 881.6 875.3 878.8 997.2 897.2 889.0 Rates of Growth 1973: 4th Q. 5.2 3.5 1974 1st Q. 7.5 6.2 Oct. Nov. -1.4 6.8 -1.4 5.0 2.4 7.9 4.7 7.8 6.6 9.6 7.7 5.6 9.8 7.1 4.6 5.6 7.8 5.6 6.7 5.4 5.8 5.5 7.4 5.3 5.9 4.7 4.7 Months: -1.8 4.1 Total Reserves -Alt. B Alt."C Adjusted Credit Proxy Alt.,,=-- A' A r. m B Art.- C Sept. Oct. Nov. Dec. 446.0 446.5 450.4 452. 1 446.0 446.5 450.0 451.0 446.0 446.4 449.6 449.9 34,142 34,869 35,093 35,351 Mpr. 1973 Alt. A 461. 1 458.2 454.4 35,381 35,635 Rates of Growth Quarters: 1973 4th Q. 5.5 4.5 3.5 1st Q. 8.0 6.4 34,142 34,858 35,059 35,245 4.0 1974 8.7 7. 5 RPD Alt. A Alt. 34,142 34,847 35,004 35,150 32,308 32,676 32,978 33,281 32,308 32,665 32,943 33,176 32,308 32,654 32,889 33,083 35,059 34,068 33,814 33,493 6.4 6.3 -1.0 9.5 5.0 7.7 3.8 5.9 Months: Oct. Nov. 1.3 10.5 1. 1 8.6 10.6 6.4 10.2 5.6 E 9.8 4.1 -2. 1 9.7 -2.5 8.9 -2.9 7.3 (9) Given the lagged effects on money demand of the interest rate increases of earlier this year, the staff believes that attainment of the growth rates for reserves and monetary aggregatesspecified in alternative B is likely to involve a further decline in the Federal funds rate over the near-term. A sharper decline in the funds rate would be likely under A. Under alternative C, money market conditions seem most likely to remain around those prevailing recently, given the more restrained growth in reserves and the aggregates posited. (10) RPD growth for October-November of course becomes larger the easier are the policy alternatives. While the differences in RPD growth in the short-run are modest, the differences in growth of nonborrowed reserves are larger in order to compensate, under the easier alternatives, for the further drop in member bank borrowings that would be envisaged. The unchanged money market conditions of alternative C encompass a Federal funds rate centered in a 9-1/2--10-1/2 per cent range and member bank borrowings that fluctuate around $1.5 billion. To attain the aggregates specified under B, the Federal funds rate would be expected to decline toward the lower part of the 8-3/4--1-l/4 per cent range indicated, and average member bank borrowings may decline to around $1.3 billion. Under A, the funds rate could drop considerably further to around 8 per cent and member bank borrowings to around $1 billion. However, it has become very difficult in recent weeks to anticipate shifts in member bank demands for borrowing as market conditions change, and these estimates of borrowing could even be a bit on the high side. (11) Under alternative C, unless the Federal funds rate declines to the lower end of the indicated range, Treasury bill rates are likely to move somewhat higher, as expectations of additional easing in monetary policy are disappointed. Upward pressure on bill rates is likely to be larger in the event that the Treasury were to offer additional bills for payment late this month or in connection with the mid-November refunding operation (the refunding of $3.7 billion of outstanding publicly-held debt will be announced October 24). Under alternative B, and even more so under A, short-term market interest rates are likely to decline over the next few weeks as market expectations of further easing in policy are confirmed. Bank prime rates probably would be reduced, and some further rate declines would be likely to occur in long-term markets. (12) Although the interest rate declines anticipated under the easing alternatives might be fairly sharp, it is quite likely that rates will turn around, particularly under alternative B. This assumes that the economy expands as projected in the Greenbook and therefore that the underlying transactions demand for money will be relatively well maintained and credit demands will be fairly strong. Thus, under alternative B, bill rates might be back in the neighborhood of current levels, or perhaps above them, by around year-end. The degree of any reversal would be tempered, however, if it proves necessary to reduce the funds rate somewhat below the bottom of the alternative B range later this year in order to achieve the desired monetary growth path. -9(13) With resumed growth in November more than offsetting a small decline in October, M 1 would expand at a modest rate over the two month period. Expansion is expected to continue into the first quarter of 1974 as transactions demands remain moderately strong, the retarding effect of interest rate increases earlier this year wears off, and recent interest rate declines further strengthen money demand. (14) Other key assumptions underlying the monetary relation- ships discussed in this bluebook are: (1) resumed expansion of out- standing large negotiable CD's, as banks experience moderate business loan growth and seek to offset a run-off on balance in U.S. Government deposits between now and year-end; (2) expansion of other time and savings deposits at banks at a moderate rate under alternative C as money market conditions remain unchanged and short-term interest rates rise from current levels, with net inflows strengthening under the easier conditions of alternatives B and A; (3) reimposition of some sort of interest rate ceilings on consumer-type certificates maturing in 4 years or more at banks and other savings institutions, with the ceiling structure working to redistribute savings flows at the margin toward nonbank savings institutions. -10- Proposed directive language (15) Presented below are three alternative formulations for the operational paragraph of the directive, which are intended to correspond to the similarly lettered policy alternatives discussed in the preceding section. For all three alternatives it is proposed to retain the instruction to take account of international and domestic financial market developments and to add a reference to the forthcoming Treasury financing. Alternatives A and C refer to the average growth rates in the monetary aggregates "than has occurred thus far this year." The annual rates of growth from December 1972 to September 1973 are as follows: M1, 4.2 per cent; M2, 6.9 per cent; and the bank credit proxy, 13.0 per cent. Alternative A To implement this policy, while taking account OF THE FORTHCOMING TREASURY FINANCING AND of international and domestic financial market developments, the Committee seeks to achieve bank reserve and moderate] FASTER growth in money market conditions consistent with [DEL: monetary aggregates over the months ahead THAN HAS OCCURRED THUS FAR THIS YEAR. Alternative B To implement this policy, while taking account OF THE FORTHCOMING TREASURY FINANCING AND of international and domestic financial market developments, the Committee seeks to achieve bank reserve and money market conditions consistent with moderate growth in monetary aggregates over the months ahead. -11- Alternative C To implement this policy, while taking account OF THE FORTHCOMING TREASURY FINANCING AND of international and domestic financial market developments, the Committee seeks to achieve bank moderate] reserve and money market conditions consistent with [DEL: SOMEWHAT SLOWER growth in monetary aggregates over the months ahead THAN HAS OCCURRED THUS FAR THIS YEAR. STRICTLY CONFIDENTIAL (FR) 10/12/73 CHART 1 RESERVES AVAILABLE TO SUPPORT PRIVATE NONBANK DEPOSITS BILLIONS OF DOLLARS ]34 for Sept - Oct - 10/1 /73) 15% growth - 30 r 1 A ii I Ii M J 1972 II I I S D M l I I J 1973 ^ 1 I 0 1973 N I S i S 0 SBreak in Series, Actual Level of RPD After Changes in Reserve Requirements Effective November 9 1972, and July 19, 1973 0 (FR) 10/12/73 CHART 2 STRICTLY CONFIDENTIAL MONETARY AGGREGATES NARROW MONEY SUPPLY M1 BILLIONS OF DOLLARS -270 250 I I 1 I 230 ___ Iliy BROADER MONEY SUPPLY M2 ~00 -580 -560 -540 520 -500 ,- ii 192 1972 i 97 1973 4% growth for Sept -Oct growth CHART 3 STRICTLY CONFIDENTIAL (FR) MONETARY AGGREGATES ADJUSTED CREDIT PROXY BILLIONS OF DOLLARS 40 450 440 430 -390 I I I I I I I I I I I I I TOTAL RESERVES 30 1972 1973 A M J J 19 73 A St en en *erie~ Actual Level of Total ResereE afte R-duct on in Reserve Requiterm-ents Eitectiv Novemrbet 9 1972 Beak in serve- Acluel Level of Total Reserve After Increase in *e .e Ruequtements Eftective July 39 19'3 S 0 CHART 4 MONEY MARKET CONDITIONS AND INTEREST RATES MONEY MARKET CONDITIONS PER CENT INTEREST RATES Long-term S11 WEEKLY AVERAGES FEDERAL FUNDS RATE _ RESERVES ,5 3 BILLIONS OF DOLLARS BORROWED I3 7FT AO ROWED I 7 1972 I I I I iI I I I 1973 1972 1973 TABLE 1 STRICTLY CONFIDENTIAL 12, OCTOBER RESERVES BANK 1973 (ACTUAL AND CURRENT PROJECTIONS) ---------------------- -------- w-----------------m------------------m-----I AVAILARLE FOR I REERVE I PRIVATE NONBANK DEPOSITS ------------ I A6GREGATE RESERVFS I REQUIRED RESERVES -----------------------------------------------------------II-----------II SEASONALLY ADJUSTED --------------------- ...........--------SI---------m--mI---------------------------I SEAS ADJ PFTO -- - - - - - - -- - - - - I NON SEAS ---------------------m S (1) - I I ArJ II - -- TOTAL RESERVES - - - - - NONPBRROWEn RFSERVES - - - - - I I PRIVATE nFMANf --------------- CODS AND NON OEP m--------------------m -------------- (3) (4) 33,98 34.142 (34,847) 31.996 32.600 (33.435) (?) OTHER TIME OEP GOViT AND INTERBANK --- (5) (6) (7) --- (8) II MONTHLY LEVELS-SMILLIONSI -----------------I 1973--AUG* SFPT. I OCT. ANNUAL RATES 31.961 32.30R (3P6541 OF CHANGE ------------------- I 31.672 32.092 (32.s57) I I II II 1 I I I I 19964 19.R72 (19.7Q9) 8,027 8*177 ( 8 291) 39806 4.075 ( 49326) 1*938 1*834 ( 2193) II I AUARTEULY II I 1973--IST TR. 2Nn QTR. 3Rn 4TR. 10.5 12.0 13.6 I II I 8.8 5.8 10.3 I P. 2.2 -0.3 -5.1 -30.3 1 I -9.7 18.2 8.6 I1 I -7.1 17.3 12.3 7.7 9.9 14.1 22.7 I -5.I 22.4 SII MONTHLY: 1973--AUG. I 8.4 I I SEPT I 13.0 I OCT. I -2.9) II ( 9.8) ( (1 9.3) ( ( -30.1) 15.1) 19.0) ( 16.7) -17.7) ( 19.7) SII SEPT-OCT.I ( I .0) if 1I WEEKLY LEVELS-SMILLIONS I --------------------- I I AUG* 1I 8 I 15 I 22 1 Pq I I SEPT. 5 I 12 I 19 26 I I OCT. 3 10 I S1 --..........---------------- 32,24 31.696 32.010 31.695 32200 32.665 31.917 32185 3?7365 II I I 1 I 1 I I I 32.062 31.420 31.718A 31.488 31,833 32.290 31.653 319961 32.176 I 32658 32,699 ( I I 1 32.699 32,448 1I I 1 if II if II 11 II 11 II 11 II ItI 34.164 33.577 33.961 33.743 34,142 32,578 31.709 3P.264 31*829 31*761 I 20.224 20,03P 19995 199834 19,984 7.929 7.941 8.011 8.049 89085 3.580 3*676 3*733 3.840 39946 1*915 19882 1*951 2*048 1*942 34,362 33.562 34046 34,377 32P800 32.307 32?562 32.532 I I I 1 I 20.014 19.73 19,7A 199933 8,151 89153 8,208 8,188 40028 4.067 40077 4,096 1697 1e646 1.861 2,011 34634 34,746 33*214 33.302 I 19.980 19.604 8.183 89245 4.109 4.518 2*047 I I I I -------------- NOTES 1e976 M ----------------- ------ DATA SHnON IN PARENTHESES ARE CURRENT PROJECTIONS. ANNUAL RATES OF GROWTH HAVE BEEN ADJUSTEl FOR CHANGES IN RESERVE REQUIRFMENTq EFFECTTVE JULY 19. AND OCT 49 1973. AT THE FOMC MEETING SEPTEMER IA8 1973 THECOMMITTEF AGREED ON A RPO RANGE OF 15 TO 18 PEP CENT. ----- -- STRICTLY CONFIDENTIAL TARLE 2 --------------------OCTOBER 12, 1973 MONETARY AGGREGATES (ACTUAL AND CURRENT PROJECTIONS, SEASONALLY ADJUSTED) I I I PERIOD MONEY SUPPLY NARROW I RROAD (M1) I (M2) (1) MONTHLY LEVELS-SRILLIONSI --------*-------------I 1973--AUG. SFPT. OCT. 263.Q 2 '63.6 2 263.2) (2 I I I ADJUSTED CREDIT PROXY I I I TIME TOTAL (2) I (3) 9 (4) (5) 550.5 552.2 (554.7) 443,9 446.0 (446.4) II II 1 4.2 AND SAVINGS DEPOSITS I OTHER I I THAN CD S I CD S 1 353.6 355.6 (356.0) (7) 246.6 288.6 (291.5) 9 I I NONDEPOSIT I SOURCES OF I FUNDS I 67.0 67.1 (64.6) 9 7.1 7.3 ( 7.5) 12 PERCFNT ANNUAL GROWTH oin II U.S. II GOVT. II DEPOSTTS II -------------- I QUARTERLY -------1973--IST OTR. 2ND QTR. 3R OQTR. I I 10.3 I I 1 0.6 15.0 12.2 II II 10.6 5.7 9.5 5.1 11 23.1 16.0 13.4 9.5 87 9.4 II MONTHLY ------1973--AUG SEPT. OCT. I I 6.' 3.7 ( 5.) -l.B I SEPT.-OCT.I I 1 17.0 5.7 ( 1.1) II ( 4.6) 1 29 I i '63.8 264.0 263.6 2 '61.8 2 5 12 19 26 P OCT. '63.8 '63.6 164.4 '64.9 2 I 1 ?2 14.0 8.4 (12.1) ( 3.4) II (10.3) ( 4.1) II I 8 15 SEPT* 1 I I II -1.6) WEEKLY LEVELS-STPLLIONS ..-.--...-.---...-.-.. AUG. 20.4 6.A ( 1.3) II 264.6 3 P 10 PE 2 262.4 I 9 I I I 548.4 549.1 550.3 %52.1 550.2 552.2 5519 5516 550.9 1 i 554.6 553.3 1 11 II II ( II 1 439.4 441.5 445.1 444.9 443.2 445.2 446.7 446.6 444.8 II II II 11 II 19 447.8 446.1 I 0 ff 3.5 65.5 I 4.4 4. ~ I 5.5 5.0 5.1 I 5.9 7.2 ? 1 350.2 351.7 353. 354.6 354.0 9 P24.6 I I 285.5 6.8 6.5 66.2 67.3 67.4 67.6 I ?75.9 9 1 9 27.2 PA7.3 355.5 355.3 356.2 356.0 288.4 287.9 I I 248.1 ?R8,l 1 289.1 66.9 355.3 355.2 290.0 290.9 65o3 64.3 I I 7.3 7.2 7.5 7.2 6.9 7.5 67.1 67.4 68.1 I 7.5 7.1 7.5 I -------~----------r----------------m--------------------w----m-------------NOTEl DATA SHOWN IN PARENTHESES ARE CURRENT PROJECTIONS. P - PRELIMINARY PE - PARTIALLY ESTIMATED STRICTLY CONFIDENTIAL (FR) OCTOBER 12, 1973 TABLE 3 RESERVE EFFECTS OF OPEN MARKET OPERATIONS AND OTHER RESERVE FACTORS (Millions of dollars, not seasonally adjusted) Rills Accept. (1) Period__ _ Open Market Operations I/ RP's Coupon Agency 3/ Total Net Issues Issues (5) (4) (3) (2) Daily Average Reserve Effect 2/ Other 4/ A Member Open Market Bank Borrowing Factors Operations (8) (7) (6) A in reserve categories req. res. against available res. 5/ U.S.G. and interb. (6)+(7)+(8)-(9) (10) (9) & Target available reserves 5/ (11) Pionthly 1971 -- Mr. April May June July Aug. Sept. Oct. 1,109 1,332 -506 649 1,073 -753 -494 1,636 1,106 -1,470 1,085 2,416 -915 -207 -228 27 --- -14 -19 -21 209 168 -20 542 -414 -942 -1,148 -143 -30 531 -- 952 -4,165 -59 3,406 -918 1,740 -4,363 -223 2,582 -682 7 1,689 1,323 1,437 -1,450 2,090 -818 265 -137 66 1 263 93 -645 -282 -1,723 -884 -1,392 1,084 -850 966 6 1,1 2p 156 -74 45 -470 311 -304 -136 75 376 66 165 1,185 545 3700 -40 505 200 175 795 680 475 1,005 NOv. Weekly 788 -198 -515 -473 253 351* -351* -- ----17 5 12 19 26 -228 -417 89 118 -169* -169* -- -5 -26 -- 158 -619 -109 2,051 -75 -891 -189 2,16 Oct. 1/ 2/ 3/ 4/ 5/ 1 8 15 22 29 Sept. 1973 -- 3 10 17 24 31 313 589 --- -20 1,567 -5,668 1,88( -5,059 Aug. -- 14 -89 -92 219 428 -464 512 1,395 -840 -719 -346 46 74 3 -149 570 -642 298 -230 345 530* -2,683* 356p* 4 1, 38p* -198 -875p 216 487 -7 2,962p -237 4 -1,6 9p -132 41 27 61 457 -637p 308 215p 1,491 -559 -672p -164 -293p 733p 3p p 5 p -244p 674 -1,019 -931 394 487* 254 23 auctions. Represents change in System's portfolio from end-of-period to end-of-period; includes redemptions in regular bill Represents change in daily average level from preceding period. Includes matched sale-purchase transactions as well as RP's. 1,m of changes in vault cash, currency in circulation, Treasury operations, F.R. float, gold and foreign accounts, and other F.R. accounts Target change for September and October reflects the target adopted at the September 18, 1973 FOMC Reserves to support private nonbank deposits. Target change for previous months reflects the bluebook patterns that are consistent with target ranges that were adopted during the month. meeting. *Includes effect of special certificate (i.e., borrbwing by Treasury from F.R.). STRICTLY CONFIDENTIAL (FR) OCTOBER 12, 1973 Table 4 SECURITY DEALER POSITIONS AND BANK POSITIONS Millions of Dollars U.S. Govt. Security Dealer Positione Bills T Coupon Issues 2) Dealer Positonr Corporate iunicipsal Bonds Bonds (3) (&) 1972 -- High Low 4,291 1,916 1,585 -93 235 0 383 40 1973 -- High Low 3,718 897 1,125 -301 175 0 1972 -- Sept. 4,099 170 Oct. hv. Dec. 2,887 3,096 3.510 207 1,039 953 Jan. Feb. Mar. 3,607 2,132 2,690 720 562 -50 Apr. eay June 2,657 1,894 2.281 July Aug. Sept. Exces* Reserves (5) n Reserve Positions 1orrowin at FRBw BasI Total Seasonal An Ne (7) (6) Reserve DetI York 38 Qher (8) (9) -5,635 -1,638 -5,720 -1,910 26& 36 631 -86 2,561 688 -5,263 -1,831 -7,267 -6,068 53 174 162 516 -3.835 -6,026 105 84 58 132 191 291 247 314 219 576 606 1,069 -3,637 -4,561 -6,977 -6,044 -3,622 -6,958 27 77 26 177 123 125 289 207 177 1,161 1,596 1,825 -6,550 -6,187 -&.273 -5,669 -5,636 -5,867 106 421 562 12 66 33 60 151 120 255 161 236 1.688 1,843 1,851 3 30 75 -3,293 -3,019 -3,507 -6,577 -5,872 -6,463 1.625 1,690 *2,745 265 39 *395 24 0 6 139 70 80 285 177 2 15p 1,953 2,165 3 1,85 p 155 163 4 1 8p -2,660 -2,689 -3.173 -6,106 -4,940 -5.355 1 8 1,193 897 58 112 0 0 86 53 499 76 2.095 2,006 141 158 -2,262 -2,315 -4,725 -5,372 2,060 1,888 2,059 -18 -301 183 0 0 0 59 75 79 316 62 165 1,Q14 2,133 2,561 1&8 163 185 -2,673 -3,559 -2,681 -5,961 -4,736 -4,068 Sept. 5 12 19 26 2,390 3,169 *2,924 *2,255 386 395 * 323 * 663 15 0 10 0 36 89 58 136 477 126 1 36p 68p 2,363 1,488 0 1,7 4p 2,191p 168 145 139p 1SOp -2,075 -3,471 -3,687 -3,050 -4,260 -6,233 -5,672 -5,649 Oct. 1973 -- 1,223 12 15 22 29 1973 -- 796 -133 *2,124 *2,739 * 462 * 443 60 5p 177 150p 4 6 1,519p 1,355p t l Ap 131p -3,137p -3,6 32 p -4,544p -6,697p Aug. 3 10 17 26 3p 288p 31 Notes" pitlnns which exclude Treasurv bills finenced vby repurchet agree.-a comme ba Tradg Security duealr tra inR pon on . Other security dealer positions are debt ments maturing in 16 days or more. are indicators of dealer holdings available for sale over the near-term. Fedin syndicate, excluding trading positions. The basic reserve deficit is excess reserves less borrowing at Federal Reserve less net still iseops eral funds purchases. Weekly data are daily averages for statement weeks, except for corporate and Msunicipal issues in syndicate which are Friday RIure.C f Government * STRICTLY COtfiRWttAL ** Beginning with Januasry 1973, monthly averages for excess reserves and borrowtngs are weighted averages of statemnt veek figures. CONFIDENTIAL (FR) OCTOBER 12, 1973 TABLE 5 SELECTED INTEREST RATES Per Cent Treasury Bills Federal Funds Period 90-Day (1) (2) 1-Vear Short-Term 90-119 Day Commercial Paper (3) (4) __Lon-Term CD's New Issue-NYC 60-89 Day (5) 90-119 Day (6) Aaa Utility New Recently Issue Offered (7) (8) Municipal Bond Buyer U.S Government (10-yr. Constant Maturity) FNMA Auction Yields (9) (10) (11) 1972 -- High Low 5.38 3.18 5.13 3.03 5.52 3.60 5 50 3.75 5.38 3 13 5.50 3.50 7.60 6.99 7.46 7.17 5 54 4.96 6.58 5.87 7 72 7.54 1973 -- High Low 10.84 5 61 8.95 5.15 8.43 5 42 10.50 5.63 10.50 5.38 10.75 5.50 8 52 7.29 8.30 7.26 5.59 4.99 7 54 6.42 9.37 7.69 1972 -- 4.87 4.66 5.44 5.07 4.88 5.00 7.40 7.4 5.36 6.55 7.65 5.04 5.06 5.33 4 74 4.78 5.07 5.39 5.20 5.28 5.21 5.18 5.40 5.00 5.00 5.19 5.19 5.13 5 38 7.38 7.09 7.15 7.38 7.18 7 18 5.19 5.02 5.65 6.48 6.28 6 36 7 72 7 71 7 68 Jan Feb. Mar. 5.94 6.58 7.09 5.41 5.60 6.09 5.58 5.93 6.53 5.76 6.17 6.76 5.63 6.16 6.78 5.75 6.78 6.75 7.38 7.40 7.49 7.35 7 41 7.51 5.05 5.13 5.29 6.46 6.64 6.71 7.69 7.72 7 78 Apr. May June 1973 -- Sept. Oct Nov Dec 7.12 7.84 8.49 6.26 6.36 7.19 6.51 6.63 7.05 7.13 7.26 8.00 7.04 7.44 7.98 6.75 7.41 8.13 7.48 7.51 7.64 7.48 7.50 7.64 5.15 5.15 5.18 6 67 6.85 6.90 7.89 7.98 8.07 Tuly 8.01 7.97 9.26 9.09 9.19 8.01 7.97 5.40 7 13 8.46 10.50 8.67 8.32 10.26 10.25 10.40 8.36 8.22 5.48 7 40 8.83 Sept. 1973 -- 10.40 Aug. 10.78 8.29 8.07 16.31 10.31 10.50 7.88 7.99 5.10 7.09 9.32 Aug 1 8 15 22 29 10.57 10.39 10.39 10.52 10.79 8.28 8.48 8.89 8.81 8.59 8.43 8.41 8.41 8.27 8.20 9 85 10.08 10.25 10 25 10.43 9.88 16.13 10.38 10.38 10.50 10.00 10 25 10.50 10.50 10.75 8 8 8 8 31 52 30 29 -- 8.28 8.30 8.16 8.21 8.24 5.59 5.58 5.47 5.44 5.34 7.48 7 54 7 41 7 33 7.26 5 12 19 26 10.79 10.74 10.86 10.84 8.69 8.95 8.71 7.53 8.22 8.33 8 32 7.78 10.50 10.50 10 50 10.10 10.50 10.50 10 50 9 75 10.75 16.75 10 75 9 75 7.94 7 74 8 03 7 81 8.02 8.06 8.03 7.84 5.18 5.18 5.05 5 00 7 7 7 6 3 10 17 24 31 10.72 9.87 7.22 7.30 7.51 7.35 9.63 9.53 9.75 9.50 9.50 9.38 7 75 6 7.9 p 7.90 6 7.8 p 5.04 4.99 6.89 6.78p Sept. Oct. 13 19 09 95 8.71 8 95 -9.27 9.37 -9.11 -- For columns 7, 8 and 10 the Columns 5 and 6 are one-day Wednesday quotes. Notes! Weekly ata for columns 1 to 4 are statement week averageq of daily data. Column 9 is a one-day quote for Thursday following the end of the weekly date is the mid-point of the calendar week over which data are averaged. The FNMA auction yield is the average yield Column 11 gives FINM suction data for the Monday preceding the end of the statement week. statement week. in the bi-weekly auction for short-term forward commitments for GCvernmet underwritten mortgages. Appendix Table CONFIDENTIAL (FR) RESERVES AND MONETARY VARIABLES October 12, 1973 Reserves Period Total (1( obfurrowed (2) _ _ Support Pvt. Depnsits (3 M eny Stock Mensures N 1 (4) N 2 (5) Bank Credit Measures Credit Proxy () 3 -(6 Loans and Investments T) Other Total Time (9) Other than CD's (10) I Institution Depoits' (11) (Per Cent Annual Rates of Growth) C's (12) Nondepost Funds (13)" Gov't. Demand (T.4 (Dollar Change in Billions) Annually 1968 1969 1970 1971 1972 +7.5 -1.1 +6.1 +7.2 +10 6 +5.3 -2.8 49.6 +8.1 +7.1 lt Ilnlf 1971 ?ni llnlf1971 +9.7 +4.4 +9.6 +6.3 1t lnlf 1972 2nd 1nlf 1972 +11.7 +9.0 lst Half 1973 +7.8 +3.6 +6.0 +6.6 +8.3 +9.3 +2.6 +8.4 +11.4 +10.8 +8.3 +2.9 +8.0 +13.5 +13.0 +9.5 +0.4 +8.2 +9.4 +11.6 +10.9 +1.9 48.1 +11.2 114.6 +11.5 -4.8 +17.9 +18.2 +15.5 +11.2 +1.4 +11.1 +16.7 +13.3 + (.3 + 3.1 + 7.1 +17.4 +17.0 +10.7 +3.4 +10 1 +3.0 +14.9 +7.4 +16.4 +9.8 +10.1 +8.4 +21.6 +13.4 +20.0 +12.1 +10.3 +14.3 +4.3 +3.4 -7.1 -0.4 -1.4 +1.1 +12.1 +2.0 +8.6 +10.4 +7.7 +8.5 +10.8 +10.3 +13.0 +12.1 +11.4 +11.1 +12.1 + 9.7 +13.6 414.7 +15.4 +14.5 +13.7 +12.1 +17.3 +15.4 44.4 +5.7 -0.3 +0.6 +0.4 47.4 +4.9 +11.4 +6.0 +7.7 +9.1 +13.8 +16.7 +20.0 +9.2 +11.6 +18.9 +1.2 -1.4 +6.5 +2.3 +6.6 +6.0 +3.2 +3.6 +4.1 +1.9 +6.0 +8.7 +8.9 +10.5 +8.5 +10.6 +9.8 +16.6 +8.0 +15.9 +14.5 +13.5 +1.7 +1.8 -0.4 +1.1 +9.2 +6.1 +8.2 +8.6 +12.7 +8.5 +10.3 +10.2 +14.9 +10.7 +12.4 +11.5 +11.0 +11.5 +9.8 +12.1 +15.6 +11. +12.9 +15.9 +15.4 414.8 +14.0 +14.4 +16.1 +10.8 +12.3 +11.6 +19.1 +14.7 +16.2 +13.9 +0.8 +3.7 +2.4 +3.3 -0.3 44.8 +10.4 +6.6 +9.9 +10.6 +0.4 +0.3 -0.4 +0.5 -1.1 +1.4 -7.1 7. +17.3 +12.3 +10.5 +191. +13.6 +1.7 ,n10. +0.6 +'.7 +9.5 +R. 0 +9.4 +4.2 +15.0 +12.2 +10.6 -20.0) +12.7 +23.1 +16.0 +11.4 +9.5 +8.7 +9.4 +13.6 + 9.3 + 2.8 +11.7 +7.1 -5.0 +0.5 +0.7 15.1 +0.9 -2.4 +26.7 -5.7 +11.0 +21.7 +9.4 +8.0 +2.9 +0.7 -6.1 +15.5 +9.8 1 -10.9 +11.0 +6.5 +13.4 +6.8 +3.9 +9.0 +6.9 +9.7 +12.9 +3.2 +2n.8 +7.7 +1.0 +14.7 +11.5 +8.0 +4.0 +6.4 +12.7 +4.4 +7.2 +7.2 +5.2 +13.3 +10.4 +15.1 +12.4 +7.9 +8.3 +9.2 +12.5 +9.3 +8.7 +10.1 +7.9 +12.2 +13.2 +16.8 +14.2 +10.7 +10.1 +11.1 +13.9 +11.6 +11.2 +12.0 + 9.8 +12.4 +9.2 +7.2 +16.2 +12.2 +15.6 +6.6 +10.0 +9.6 +9.5 +11.9 +10.5 +13.4 +15.3 +13.9 +17.1 +11.4 +15.5 +b.5 +10.1 +14.2 +14.0 +11.2 +21.7 +14.. -0.5 +6.1 -0.5 +7.5 +10.7 +12.4 +5. 0 -1.8 +6.4 +5 .9 -'4.7 +8.1 +9.8 +10.4 +5.1 +6.4 +9.8 +9.0 +6.9 +8.4 +9. 1 +10.4 +5.6 +4. 2 +8.3 +16.4 +19.7 +13.1 +12.1 +11.1 + 8.8 +17.0 *1'.0 +23.7 417." +4.4 +6.6 +26.9 -9.1 +22.8 -4,7 +13.4 +9.6 +9 4 +16.6 +18.6 +8.4 +19.2 +15.4 +13.2 +7.8 +13.0 +11.4 +12.3 +14.0 +10.2 +12.8 +10.4 +11.2 +12.9 +5.7 +9.6 +8.7 +9.1 +8.1 +55 +14.0 +18.9 +20.0 +17.4 +15,8 +13.4 +14.5 +17.0 +15.5 +15.7 +15.5 +13.2 +12.7 +15.8 +14.4 +10.2 + 9.4 + 7.8 +10.4 + 6.5 +0.4 +0.2 +0.3 +0.2 +0.2 -1.7 +1.1 +1.1 +0.7 -1.3 -1,0 -0.7 40.6 +1.2 +0.6 -0.4 +0.6 +0.1 +0.3 -1.7 -1.2 +0.5 + 0.4 +0.1 +0.6 +0.1 +1.5 +1.5 +0.7 +0.8 +0.8 +0.8 +0.2 +1.2 +1.9 +1.2 4.5 +6.1 +3.8 +3.1 +0.3 +2.4 +2.5 -0.1 0.3 +0.1 -0.2 +0.2 +31.3 -41.3 -10.5 +26.1 +1.1 +24.0 +44.9 -30.3 +17.7 +16.2 +11.6 +12.8 +18.2 +12.9 +13.6 +15.9 +12.0 +11.5 +14.2 +17.1 ,+15.7 '+21.6 +30.9 ,+21.0 +18.2 +8.1 +12.6 +20.4 +0.9 +0.6 -1.7 +0.8 p +8.6 +22.7 +13 0 -1.4 +3.7 +2.9 +5.7 4.1 + 1.5 +1.0 +0.1 +0.9 I -- - Prelimitary. I +8.1 -1.7 +8.6 +7.2 +9.7 +2.9 -12.4 +14.4 +7.7 +10.1 +2.6 +13.0 -8.4 -7.6 +0.4 -0.6 +0,5 +1.1 -0.3 +0.4 Semi-Ann.l ly QuarterlyIrd Qtr. 4th Qtr 1971 1471 1st Qtr. 1972 2nd Qtr, 1072 Ird Qtr 1972 ath Qtr. 1972 +10.4 +12 6 +3 6 114.2 1t Qtr. 1973 *nr tr. 1971 3rd Qtr 1973 +13.3 1072* 19/3: B- Jan Feb. Mar. Apr. Ml June July Aug. Sept. net . Nov. Dec. Jan. Feb. Mar. Apr. May June July Aug. .Sept. TF. +10.7 +13.1 -0.8 +8* .- +21.8 -5.2 +14.5 +8.8 +6.4 +5.2 +7.6 -1.9 +18.2 +11.' +12.5 +35.9 -22.1 +13.3 +12.3 I I - ( +6 7 +9.8 :11.4 1-13.1 1-16.6 +1.2 13.3 -116.7 46.8 1 1 1 +8.4 I - -.- ----. _._. - ---.- +1*6 +0.1 +0.3 -0.1 +0.2 +0.1 +0.1 .1 - ...-- Reserve requirements ot Eurodollar borrowings are included beginning October 16, 1969, and requiremefnts on bank-r.aited commercial paper are included beginning October 1, 1970. I/ Growth r tee are based on estifated motithly average levels derived by averaging end of current month and end of previous moth reported data. 2/ Series revised to ineorpotate new seasonal factors aid June 30, 1973, benchmark adjustents. Appendix Table II RESERVES AND MONETARY VARIABLES (Seasonally adjusted, billions of dollars) RESERVES MONEY STOCK MEASURES NonPeriod Total Available to Support Pvt. borrowed Depiosits BANK CREIT MEASURES Adjusted Credit Total Loans and (7) (8) (9) 594.0 641.3 727.7 307.7 332.9 364.3 1 TotalInvestments Total Time (5) (4) CONFIDENTIAL (FR) October 12,1973 (6) OTHER Time Other thn CDs Thrift Institution Deosit (10) (11) 405.6 438.5 487.6 194.4 229.2 270.9 183.5 203.9 237.9 NonDeposits C's Funds U.S. Gov't Demand 201.7 216.1 253.8 (12) (14) I (15) ANNUALLY: 27,959 29,121 31,209 26,699 28,727 31,060 25,339 26,975 28,907 33,171 33,381 33,327 33,018 33,038 32,870 Oct. Nov. Dec. 33,832 31,883 31,309 1973--Jan. Feb. Mar. Dec. 1969 Dec. 1970 Dec. 1971 208.8 221.3 236,0 162.7 172.2 183.4 392.3 425.2 473.8 30,317 30,562 30,890 193.1 193.8 194.8 504.5 508.4 512.1 388.3 391.4 394.5 525.2 531.4 537.6 295.0 298.9 301.9 256.8 259.8 262.0 279.6 283.2 286.9 33.295 31,297 30,063 30,973 29,496 28,862 195.9 196.5 198.7 516.4 519.8 525.1 398.4 401.9 406.4 542.6 552.4 559.0 304.8 308.4 312.8 264.8 267.1 269.6 290.6 293.8 296.9 32,242 31,649 31,999 30,848 29,787 29,526 29,411 29,296 29,622 198.4 199.3 198.7 527.9 530.5 532.6 409.2 414.8 421.6 567.3 578.5 586.8 316.9 322.6 330.9 272.5 273.8 276.0 300.8 304.4 307.0 Apr. May June 32,326 32,445 32,460 30,167 30,195 30,800 29,860 30,095 30,511 199.5 201.6 203.9 536.2 540.6 545.3 426.2 430.5 434.5 593.2 601.4 605.5 336.7 341.8 344.1 278.0 280.1 282.0 309.4 311.4 314.1 July 33,569 33,898 34,142 32,332 31,996 32,600 31,324 31,961 32,308 204.9 204.2 203.5 547.6 550.5 552.2 437.7 443.9 446.0 612.2 620.7 622.8 347.7 353.6 355.6 283.3 286.6 288.6 315.8 315.9 316.3 4 11 18 25 33,501 32,578 33,849 33,808 32,126 31,647 32,853 32,311 31,113 30,383 31,350 31,567 205.0 205.0 205.3 204.2 547.4 546.8 548.0 547.0 438.3 436.7 437.0 437.7 346.1 346.3 347.6 368.7 283.0 282.4 283.2 283.4 1 8 15 22 29 34,164 33,577 33,961 33,743 34,142 34,362 33,562 34,046 34,377 32,578 31,709 32,264 31,829 31,761 32,800 32,307 32,562 32,532 32,248 31,696 32,010 31,695 32,200 32,665 31,917 32,185 32,365 204.5 203.7 204.8 205.2 203.3 203.7 2C4.0 203.5 201.8 548.4 549.1 550.3 552.1 550.2 552.2 551.9 551.6 550.9 439.4 441.5 445.1 444.9 443.2 445.2 446. 7 446.6 444.8 MONTHLY: 7 19 2--July Aug. Sept. Aug. Sept. WEEKLY: 1973--July Aug. Sept, 5 12 p 19 p 26 p 6 :::::::::::::::::: ::::::::::::::::::::. . . .. iii iiiiiii 350.2 351.7 353.2 354.6 :::::::::::::::::::: 354.9 355.5 355. 3 :: :: :: : : 356.2 : :::,:: : :: : :: 356.0 284.6 285.5 285.9 287.2 287.3 288.4 287.9 288.1 289.1 ::::::::::::::::::::::::: ::::::::::::::::::::::::: :::::::::::::::::::::::: :::::::::::::::::::::::: :iiii:i:iiiiii:::i:i:II^I :::::::::::;::;:::::::::: Oct. 3 p 34,634 33,214 32,658 264. 204.6 554.6 ii-i. 447.8 Iiiiiiiiii"ii"ii: 355.3 z. :::::: ::::::::::::: a. I p - Preliminary NOTE: Reserve requirements on Eurodollar borrowings are included beginning October 16, 1969, and requirements on bnnk-related commercial paper are included beginning October 1, 197P. Adjusted credit proxy includes mainly total member bank deposits subject to reserve requirements, bank-related commercial paper, and Eurodollar borrowings of U.S. banks. Weekly data are daily averages for statement weeks. Monthly data are daily averages except for nonbank commercial paper figures which are for last day of month. Weekly data are not available for M,, total loans and investments and thrift institution deposits. Estimated monthly average levels derived by averaging end of current month and end Of previosin month reported data. I/ 2/ Series revised to incorporate new seasonal factors and June 30, 1973, benchmark adjustments, APPENDIX TABLE III Growth Rate in Money Supply (Per cent change at an annual rate) M M Q M Q I 8.9 6.3 17.1 13.7 18.0 14.8 11.1 11.2 12.1 14.8 14.1 16.3 III 4.1 7.1 6.0 8.2 8.9 10.6 IV 1.9 2.2 8.7 7.4 10.5 9.6 9.2 5.3 12.7 11.1 14.9 13.2 6.1 8.4 8.5 10.0 10.7 12.1 III 8.2 8.0 10.3 10.3 12.4 12.2 IV 1972 M II 1971 p 8.6 7.1 10.2 9.5 11.5 11.4 I 1.7 4.7 5.7 7.7 8.6 II 10.3 6.9 9.5 7.8 9.4 8.5 0.6 5.2 5.1 7.0 4.2 6.5 1 II 1973 III M = Annual rates of growth calculated from average levels in the final months of the quarters. Q = Annual rates calculated from average levels in all three months of the quarters. 10.0
@FedFRASER