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Prefatory Note The attached document represents the most complete and accurate version available based on original copies culled from the files of the FOMC Secretariat at the Board of Governors of the Federal Reserve System. This electronic document was created through a comprehensive digitization process which included identifying the bestpreserved paper copies, scanning those copies, 1 and then making the scanned versions text-searchable. 2 Though a stringent quality assurance process was employed, some imperfections may remain. Please note that this document may contain occasional gaps in the text. These gaps are the result of a redaction process that removed information obtained on a confidential basis. All redacted passages are exempt from disclosure under applicable provisions of the Freedom of Information Act. 1 In some cases, original copies needed to be photocopied before being scanned into electronic format. All scanned images were deskewed (to remove the effects of printer- and scanner-introduced tilting) and lightly cleaned (to remove dark spots caused by staple holes, hole punches, and other blemishes caused after initial printing). 2 A two-step process was used. An advanced optimal character recognition computer program (OCR) first created electronic text from the document image. Where the OCR results were inconclusive, staff checked and corrected the text as necessary. Please note that the numbers and text in charts and tables were not reliably recognized by the OCR process and were not checked or corrected by staff. October 1, 1982 Strictly Confidential (FR) Class I FOMC MONETARY POLICY ALTERNATIVES Prepared for the Federal Open Market Committee By the staff Board of Governors of the Federal Reserve System STRICTLY CONFIDENTIAL (FR) CLASS I - FOMC October 1, 1982 MONETARY POLICY ALTERNATIVES Recent developments (1) M1 increased at about an 8 percent annual rate from June to September, and M2 by about 9-3/4 percent. The Committee's targets for the period were 5 and 9 percent, respectively, but somewhat more growth was considered to be acceptable depending on whether economic and financial uncertainties seemed to be increasing liquidity demands and affecting financial asset preferences. (2) Expansion of M1 was strong in August and September, when NOW accounts grew quite rapidly, in part reflecting the early impact of the tax cut as well as precautionary behavior as the economy remained unexpectedly sluggish. The reduced level of short-term market rates has considerably de- creased the earnings disadvantage to keeping funds in NOW accounts. Demand deposits also grew rather rapidly in September, perhaps partly in response to increased securities markets activity and possibly to some increase in compensating balances as the earnings value to banks of corporate deposits declined. (3) Following a very rapid expansion in August, M2 increased at only a 5-1/4 percent annual rate in September, as growth in the nontransaction component decelerated unusually rapidly. Money market fund growth slowed as their yields declined in lagged reaction to earlier reductions in market rates. Growth in the total of small time and savings deposits also slowed sharply. Thus, it would appear that some funds may have been shifted out of M2 into market securities. (4) Bank credit grew at a 6-1/2 percent annual rate in August, and partial data for September indicate that growth has slowed somewhat KEY MONETARY POLICY AGGREGATES (Seasonally adjusted, annual rates of growth) 1982 July Aug. June to Sept.2P/Sept.P-e 1981:Q4 to 1982: 1982: Q3 P2/ Sept.£g/ Money and Credit Aggregates 5.8 -0.3 14.0 8.1 9.7 14.2 5.2 9.8 12.9 15.4 2.6 10.3 11.2 12.6 (Nontransaction component) 10.4 18.4 3.5 11.6 10.7 10.8 10.6 3/ 3/ 6.4 6.4 3.5 Nonborrowed reserves 13.1 15.9 11.1 13.5 5.1 Total reserves -1.6 8.8 23.2 10.2 5.8 2.8 6.8 12.2 Adjustment borrowing 641 422 816 Excess reserves 314 312 369 Bank credit 7.5 7.3 Reserve Measures Monetary base Memo: 7.6 (Millions of dollars) pe - Partially estimated. 1/ 2/ 3/ Growth rates of reserve measures are adjusted to remove the effects of discontinuities resulting from phased changes in reserve ratios under the Monetary Control Act. Nonborrowed reserves include special borrowing and other extended credit from the Federal Reserve. Measured from December-January average base. -3- further. This may reflect reduced demands for short-term credit as well as, possibly, a degree of cautious behavior on the part of at least some large banks in view of current economic and financial difficulties. Out- standing large time deposits of banks contracted in September, on average, the first such decline in almost a year. Business loan growth slowed sharply in August, but appears to have picked up in the early weeks of September, reflecting takedowns of loans related to recent merger activity. Other forms of short-term borrowing by nonfinancial business have also been weak; the volume of commercial paper outstanding edged down in August and dropped further in September. In part the weakness in short-term borrowing reflected a pick-up in bond market financing by nonfinancial businesses. (5) Total reserves expanded at about a 9 percent annual rate in August but growth accelerated to about a 23 percent annual rate in September when expansion in M1 rose considerably above the 5 percent June-September path. A little less than half of the growth in total reserves last month was supplied by nonborrowed reserves. The increase in adjustment borrowing in September stemmed partly from temporary borrowing related to special bank funding problems (which was offset by reduced nonborrowed reserves) and partly from the strength in M1 (though the implied rise in borrowing was limited so as to be accommodative to some of the apparent increase in liquidity demands).1/ (6) The federal funds rate has moved into a trading range generally somewhat above the 10 percent discount rate, up from the 9 percent area that had emerged in the market around the time of the August FOMC meeting when expectations of continued declines in short-term rates were strong. 1/ See Appendix I for intermeeting reserve path adjustments. The discount rate was lowered by 1/2 point to 10 percent shortly after the meeting, but market expectations of further easing in money market conditions dissipated with continued strength of the money supply. The short- term rate structure generally came under upward pressure, but this was reflected entirely in yields on private instruments, as market demand for Treasury securities was intensified by heightened concerns about credit quality. Long-term market interest rates have continued to trend down since late August, with Treasury, corporate, and municipal rates dropping 1/4 to 3/4 of a percentage point. In the mortgage markets, the rate on conventional fixed rate commitments has dropped about 1 percentage point in typical lagged response to the decline in bond rates. (7) The dollar has risen by about 3-1/2 percent on a weighted average basis since the last Committee meeting, reaching a 13-year high. Although the U.S. private short-term interest rates have backed up since late August, while foreign interest rates have continued to edge down, such a change in interest differentials may have been a less important factor in the increased demand for dollar assets than worldwide political and financial strains. Alternative near-term targets (8) The table below presents three alternative targets for M1 and M2 for the fourth quarter of 1982 and associated intermeeting ranges for the federal funds rate. More detailed data for the alternatives are shown in the table and charts on the next few pages. The quarterly interest rate path underlying the staff's GNP projection is contained in Appendix II. Alt. A Alt. B Alt. C M1 5 2½ 0 M2 9½ 8½ 7½ 7 to 11 8 to 12 9 to 13 Growth from September to December Federal funds rate range (9) All of the alternatives imply a slowing of M1 and M2 growth over the last three months of the year from their summer pace; however, they generally also imply some overshoot of the FOMC's annual targets. Alternative C would achieve the upper limit of the Committee's 2-1/2 to 5-1/2 percent longer-run M1 range for 1982, while the growth rates of alternatives B and A would lead to overshoots in the 1/2 to 1 percentage point range. Under all alternatives, M2 would remain above the upper end of its 6 to 9 percent longer-run range. (10) Alternative B, which calls for M1 growth from September to December at a 2-1/2 percent annual rate, appears consistent with the federal funds rate over the intermeeting period continuing on average to be a little above the current discount rate, and with little net change in other short-term rates. Total reserves under this alternative would expand at a Chart 1 CONFIDENTIAL (FR Class II FOMC Actual and Targeted M1 wVII Billions of dollars 480 -ACTUAEVEL LEVEL * * * SHORT-RUN ALTERNATIVES 470 .A * " . ' . , • c -- 2 /2% 460 450 -- 440 -- 430 -- 420 I O I N 1981 D i I J I 1 F M I A I M I J I J 1982 I A I S I 0 I N 410 D Chart 2 CONFIDENTIAL (FR) Class II FOMC Actual and Targeted M2 and M3 M2 2000 - ACTUAL LEVEL * * SHORT-RUN ALTERNATIVES -41950 -- - O... 1900 1850 -- 1800 I I I O N 1981 D I J I F I M I A I M I I J J I A I S I O I N 11750 D 1982 M3 Billions of dollars 2400 - ACTUAL LEVEL * * SHORT-RUN ALTERNATIVES -- 2350 6'/2% -- 2300 - ff -- 2250 - -- I O N 1981 I I D I J I F I M I A I M I I J J 1982 I A 2200 2150 I I S O N 2100 D Alternative Levels and Growth Rates for Key Monetary Aggregates Alt. A 1982--July August September October November December Alt. B Alt. C Alt. A Alt. B Alt. C Alt. A Alt. B Alt. C 451.3 455.2 460.5 463.0 464.6 466.4 451.3 455.2 460.5 462.2 462.8 463.4 451.3 455.2 460.5 461.3 461.1 460.5 1923.4 1946.2 1954.7 1964.4 1981.4 2000.5 1923.4 1946.2 1954.7 1963.1 1978.6 1995.7 1923.4 1946.2 1954.7 1961.8 1975.8 1991.0 2320.2 2355.7 2362.5 2372.9 2395.3 2412.4 2320.2 2355.7 2362.5 2371.6 2392.5 2407.6 2320.2 2355.7 2362.5 2370.3 2389.7 2402.9 Growth Rates Monthly -0.3 10.4 14.0 6.5 4.1 4.6 -0.3 10.4 14.0 4.4 1.6 1.6 -0.3 10.4 14.0 2.1 -0.5 -1.6 9.7 14.2 5.2 6.0 10.4 11.6 9.7 14.2 5.2 5.2 9.5 10.3 9.7 14.2 5.2 4.4 8.8 9.2 12.6 18.4 3.5 5.3 11.3 8.6 5.1 2.5 0.0 9.4 8.4 7.4 8.4 7.6 Q4 10.4 3.3 3.5 7.9 10.4 3.3 3.5 6.2 10.4 3.3 3.5 4.6 9.8 9.5 9.7 8.4 9.8 9.5 9.7 7.8 9.8 9.5 9.7 7.2 8.7 10.7 12.0 8.1 8.7 10.7 12.0 7.6 8.7 10.7 12.0 7.1 Growth Rato 1981Q4 - 1982Q4 6.4 6.0 9.7 9.5 9.3 10.2 10.1 10.0 1982--July August September October November December Sept. - Dec. 12.6 18.4 3.5 4.6 10.6 7.6 12.6 18.4 3.5 4.0 9.8 6.6 6.8 Growth Rates Quarterly Average 1982--Q1 Q2 Q3 Memo 5.5 5 percent annual rate over the fourth quarter. Borrowing from the Federal Reserve would be around $450 million, and nonborrowed reserves would expand at about a 9 percent annual rate. (11) The moderation in month-by-month M1 growth under this alternative assumes that the rapid build-up of NOW accounts of the past two months slows as households adjust financial asset holdings and spend- 1/ ing with a lag to the recent tax cut.1/ We have also assumed that the unusually rapid rise in demand deposits of late summer will abate and soon resume the downward trend of earlier this year. Even with a slowing in M1 growth to the 2-1/2 percent annual rate contemplated for the last three months of the year, growth in the fourth quarter on a quarterly average basis would be at a 6-1/4 percent annual rate, about the same as the projected growth in nominal GNP. (12) Growth of M2 would also be at a relatively moderate 8-1/2 percent pace under alternative B over the last three months of the year. Expansion in the nontransactions component of M2 may speed up from September, but is likely to remain below the very rapid pace of July and August. Money market fund growth should remain slow, and some part of the sizable volume of ASCs maturing in October might shift to market instruments, particularly municipals, though the staff believes that the bulk will be either rolled 2/ over or otherwise remain in M2. No allowance has been made for the effects of legislation requiring DIDC to establish a ceilingless account for depository institutions that is competitive with money market mutual funds. This account must be made available to the public 60 days after date of enactment. When it becomes available, possibly in early December, the new instrument is likely to have a substantial impact on M1 and on the composition and possibly the total of M2, depending on the exact character of the account or accounts authorized by DIDC. 2/ A bulge in M1 related to ASCs cannot be ruled out for the first week of October, when certificates with a maturity value of $25 billion come due. Some of the proceeds of maturing ASCs could be temporarily placed in demand deposits or NOW accounts in the process of being reinvested or used to support consumption. 1/ -8- (13) Bond rates are likely to remain near current levels under alternative B, and could even decline a bit further if investors continue to see little, if any, sign of an economic recovery. Despite the further reduction in deposit costs at S&Ls and MSBs--as higher-cost deposits are rolled over--thrift hesitancy to commit funds and a leveling off of bond rates is likely to keep mortgage rates from falling much below 15 percent. (14) The growth of credit extended to all domestic nonfinancial borrowers, including the Treasury, is expected to slow in the fourth quarter from the third-quarter pace. However, this slowing does not reflect a lessening of credit market pressures. The federal deficit in the current quarter is expected to be slightly larger (seasonally adjusted) than in the third. In the third quarter, the Treasury had borrowed heavily but also had made some of these funds available to the market by adding substantially to its assets in the form of cash balances. The fourth-quarter deficit will be financed in part by liquidation of these assets as well as by further borrowing. Flows of credit to private domestic nonfinancial sectors in the fourth quarter are projected to remain close to the pace of the third quarter, with the indebtedness of these sectors increasing at a 6-1/2 percent annual rate, about in line with projected GNP growth. Aggregate business borrowing should moderate as external financing needs decline with weakness in investment expenditures, but household credit usage is likely to rise a little as housing and consumer durable purchases increase somewhat in lagged response to the July tax cut and recent declines in interest rates. For the third and fourth quarters together, credit raised by all domestic nonfinancial sectors is projected to expand at a 9-1/2 percent annual rate, up from 8-1/2 percent in the first half of the year, with increased borrowing by the Treasury more than accounting for the pickup in the total. (15) Alternative C calls for virtually no further growth in M1 from September to December, which would achieve the upper limit of the FOMC's annual target for that aggregate. Total reserves would be expected to expand at a 2 percent rate over the fourth quarter. Such reserve and money growth would probably involve a federal funds rate moving rather promptly into the 11 to 11-1/2 percent area. Assuming no change in the discount rate, borrowing would likely be around $1 billion and nonborrowed reserves would show little net change. (16) The firming of the federal funds rate contemplated by this alternative would probably cause quite a sharp reaction in short-term markets, particularly given present market concerns about the condition of financial institutions and businesses. Private short-term rates may rise substantially, accompanied by a smaller rise in Treasury bill rates. Bond yields also would probably also come under considerable upward pressure for a short while. However, such pressures would be likely to dissipate over time as a tightening in money markets would tend to reduce expectations of a business recovery next year and of inflation. A considerable further strengthening of the dollar on exchange markets might develop, particularly if money market rates abroad continue to ease. (17) Alternative A, which targets M1 growth at a 5 percent and M2 at a 9-1/2 percent annual rate from September to December, would probably accommodate an easing in money market conditions over the months ahead. The funds rate might fall to around 9 to 9-1/2 percent, with total reserves rising at an 8 percent annual rate during the final three months of the year. At the current discount rate, adjustment (plus seasonal) borrowing -10- would fall to frictional levels of $150 million or less, and nonborrowed reserves would expand at a 15 percent annual rate. The market would come to expect a further drop in the discount rate. (18) In such an environment, substantial reductions in short- term interest rates are likely, with the 3-month bill rate falling to around 6-1/2 to 7 percent. The easing of money market conditions may also improve investor attitudes toward private market instruments, particularly bank CDs, as the over-all economic and financial outlook is viewed more favorably. Spreads between large CDs and bill rates will probably narrow, but still remain historically high. With bank costs of funds and other short-rates declining, there would be strong downward pressure on the bank prime rate, with that rate perhaps declining to 12 percent or somewhat lower. Reductions in bond rates could be appreciable if the further decrease in returns on short-term investments brings more investors into the long-term market in an effort to lock in relatively high yields. -11- Directive language (19) the directive. Given below is a suggested operational paragraph for The specifications adopted at the meeting on August 24 are shown in strike-through form. The language in brackets, which indicates that a shortfall in growth would be acceptable in the context of declining interest rates, is suggested for consideration if the Committee were to opt for alternative A, the most expansive alternative, although it may also be useful for alternative B. This language would convey the Committee's desire to have growth of money for the year closer to the longer-run target should that turn out to be feasible. In the short run, the Committee [DEL: to continues seek]SEEKS behavior of reserve aggregates consistent with growth of M1 and M2 from [DEL: to] September TO DECEMBER at annual rates of about [DEL: June 5] ____ percent and about 9___ growth would be percent respectively. [DEL: Somewhat-more-rapid acceptable depending on evidence that economic and financial uncertainties are leading to exceptional liquidity demands and changes in financial asset holdings.] SHORTFALL IN [A GROWTH OF THE MONETARY AGGREGATES FROM THESE RATES WOULD BE ACCEPTABLE IN THE CONTEXT OF DECLINING INTEREST RATES.] may call for Committee consultation if The Chairman 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: 7] ____to [DEL:____ percent. 11] Appendix I RESERVES TARGETS AND RELATED MEASURES INTERMEETING PERIOD (Millions of dollars; not seasonally adjusted) Reserves Targets for Intermeeting Sub-Period (average for subperiod) Date Reserves Path Constructed Total Reserves _1) Nonborrowed Reserves (2) Projection of Reserves Demanded (average for sub-period) Total Reserves (3) 3-Week Sub-Period: August 27 September 3 10 Required Reserves (4) Excess Reserves (5) Implied Adjustment Borrowing For Remaining Average Statement Weeks for of Intermeeting 1 Sub-Period Period / (7) (6) September 1 to September 15 39,160 39,2231/ 39,0301/±/ 39,510 39,609 39,767 39,210 39,213 39,332 300 396 435 350 386 737 350 384 993 39,793 Actual 3-week Average 39,510 39,5732/ 39,6632/ 38,982 39,793 39,330 463 811 -- 3-Week Sub-Period: 5 September 22 to October 6 September 17 24 39,933/ 39,7841/ 39,583. / 6 39,682 /7/ 40,227 40,278 39,927 40,010 300 268 644 597 644 550 October 39,784 39,743 8 / 40,348 40,004 344 605 500 1 1/ Represents borrowing in remaining statement weeks (as intermeeting sub-period progresses) implied by each weekly updating of the sub-period average nonborrowed reserves path. The movement in implied borrowing represents deviations in total reserves from target as well as any compensation for misses in nonborrowed reserves from target in earlier weeks of the intereeting sub-period. 2/ Total and nonborrowed reserves paths adjusted upward by $63 million due to changes affecting the reserves multiplier. 3/ Total and nonborrowed reserves paths adjusted upward by $90 million due to changes affecting the reserves multiplier (includes small revisions to required reserves and the reserves multiplier received as the week progressed). 4/ Nonborrowed reserves path adjusted downward by $283 million to take account of the increased demand Tor borrowings in the September 8 and September 15 statement weeks. 5/ Total and nonborrowed reserves paths adjusted downward by $257 million due to changes affecting the Ml reserves multiplier. Preliminary upward adjustments of $159 million, on net, had been taken earlier. 6/ Total and nonborrowed reserves paths adjusted downward by $149 million due to changes affecting the ~I reserves multiplier (includes small revisions to required reserves and the reserves multiplier received as the week progressed). 7/ Nonborrowed reserves path adjusted upward by $248 million to accomodate the acceptably more rapid growth in money. 8/ Nonborrowed reserves path adjusted upward by $61 million to keep reserves pressures about unchanged in transition week just before the FOMC meeting. APPENDIX II INTEREST RATES UNDERLYING GREENBOOK GNP FORECAST (Quarterly averages) 3-Month Treasury Bill 9.32 Offered Aaa Utility Bond 14.56 10-1/4 1982--Q3 (Actual) Federal Funds 11.01 7-3/4 13-1/2 14-3/4 8-1/2 13-3/4 14-3/4 9 14 15 10 14-1/4 15-1/4 10-1/2 14-1/4 15-1/4 1983--Q1 11-1/2 12-1/2 Recently Fixed-rate Mortgage Commitment 16.17 Table 1 Selected Interest Rates October 4, 1982 Percent Short-Term Period federal funds Treasury bills secondary auctin market uin m 1-year 1onth 8-month CDs secondary market 3-month Long-Term comm. paper 1-month money market mutual fund U.S. government constant maturity yields bank prime loan 3-year 10-year 7 8 9 10 30-year corporate Aaa utility recently offered municipal Bond Buyer home mortages secondary market primary FNMA GN conv. auction security 1 2 3 12 13 14 15 1981--High Low 20.06 12.04 16.72 10.20 15.05 10.64 15.85 10.70 18.70 11.51 18.33 11.39 17.32 11.84 20.64 15.75 16.54 12.55 15.65 15.03 17.72 13.30 18.63 12.27 11.81 13.98 9.49 14.80 19.23 14.84 17.46 13.18 1982--High Low 15.61 10.11 14.41 7.43 13.51 9.44 14.36 8.99 15.84 9.59 15.56 8.19 13.89 9.46 16.86 13.50 15.01 11.78 14.81 11.93 14.63 11.80 16.34 13.26 13.44 10.38 17.66 15.19 18.04 15.78 16.56 14.00 1981--Aug. Sept. 17.82 15.87 15.51 14.70 14.70 14.53 15.55 15.06 17.96 16.84 17.58 15.95 17.17 16.55 20.50 20.08 16.00 14.94 15.32 14.17 14.67 16.82 17.33 12.26 12.92 17.29 18.16 17.63 18.99 16.67 17.06 Oct. Nov. Dec. 15.08 13.31 12.37 13.54 10.86 10.85 13.62 11.20 11.57 14.01 11.53 11.47 15.39 12.48 12.49 14.80 12.35 12.16 15.32 14.33 12.09 18.45 16.84 15.75 15.50 13.11 13.66 15.15 13.39 13.72 14.68 13.35 13.45 17.24 15.49 15.18 12.83 11.89 12.90 18.45 17.83 16.92 18.13 16.64 16.92 16.61 15.10 15.51 1982--Jan Feb. Mar. 13.22 14.78 14.68 12.28 13.48 12.68 12.77 13.11 12.47 12.93 13.71 12.62 13.51 15.00 14.21 12.90 14.62 13.99 12.01 13.11 13.49 15.75 16.56 16.50 14.64 14.73 14.13 14.59 14.43 13.86 14.22 14.22 13.53 15.88 15.97 15.19 13.28 12.97 12.82 17.40 17.60 17.16 17.80 18.00 17.29 16.19 16.21 15.54 Apr. May June 14.94 14.45 14.15 12.70 12.09 12,47 12.50 11.98 12.57 12.86 12.22 12.31 14.44 13.80 14.46 14.38 13.79 13.95 13.74 13.49 13.07 16.50 16.50 16.50 14.18 13.77 14.48 13.87 13.62 14.30 13.37 13.24 13.92 15.44 15.24 15.84 12.59 11.95 12.45 16.89 16.68 16.70 16.27 17.22 15.30 15.84 July Aug. Sept. 12.59 10.12 10.31 11.35 8.68 7.92 11.90 10.37 9.92 12.24 10.11 9.54 13.44 10.61 10.66 12.62 9.50 9.96 12.86 11.02 n.a. 16.26 14.39 13.50 14.00 12.62 12.03 13.95 13.55 15.61 12.28 16.82 -- 15.56 13.06 12.34 12.77 12.07 14.47 13.60p 11.23 10.66 16.27 15.43 15.78 7 14 21 28 14.47 13.18 12.14 11.02 12.59 11.88 11.06 10.51 12.78 12.20 11.57 11.39 12.98 11.97 11.44 11.38 15.13 14.13 13.34 12.08 14.57 13.54 12.27 11.04 13.14 13.28 13.02 12.22 16.50 16.50 16.36 16.00 14.74 14.17 13.75 13.65 14.47 14.04 13.69 13.76 13.96 13.60 13.36 13.40 15.80 15.70 15.26 15.47 12.47 12.36 12.01 11.97 4 11 18 25 11.15 10.90 10.11 9.04 9.92 9.99 8.68 7.43 11.18 11.25 10.32 9.44 10.67 10.94 9.82 8.99 11.63 11.65 10.51 9.59 10.73 10.77 9.65 8.19 11.89 11.52 11.38 10.39 15.29 15.00 14.71 13.79 13.36 13.36 12.59 11.83 13.62 13.73 13.01 12.39 13.33 13.31 12.73 12.22 15.16 15.11 14.00 13.92 1 8 15 22 29 10.15 10.14 10.27 10.31 10.12 8.00 10.05 8.31 10.04 8.16 10.13 7.75 9.95 7.50 9.63 9.75 9.61 9.70 9.44 9.20 10.17 10.53 10.81 10.84 10.53 8.88 9.99 10.14 10.00 9.78 9.93 9.86 9.79 9.60 9.46 13.50 13.50 13.50 13.50 13.50 12.30 12.08 12.23 12.10 11.78 12.74 12.53 12.61 12.36 11.93 12.46 12.21 12.27 12.00 11.80 13.88 13.87 13.67 13.28 13.44p 10.23 12.17 10.50p 7.60 7.62 7.35 -- 10.67 9.79 -- 13.50 10.44 9.96 -' 13.50 10.40 10.06 -- 13.50 11.96 11.52 11.38p 12.09 11.73 11.55p 1982--July Aug. Sept. Dally-- Sept. Oct. 24 30 1 9.75 9.46 9.31 4 5 S 6 I NOTE: Weekly data for columns 1,2, 3, and 5 through 11 are statement week averages. Weekly data in column 4 are average rates set in the auction of 6-month bills that will be Issued on the Thursday following the end of the statement week. Data In column 7 are taken from Donoghues Money Fund Report. Columns 12 and 13 are 1-day quotes for Friday and Thursday, respectively, following the end of the statement week. Column 14 is an average of contract Interest rates on commitments for conventional first mortgages with 80 percent loan-to-value ratios made by a sample of Insured savings and loan associations on the Friday 16.22 11 16 - 15.40 14.74 S 14.14 16.93 16.88 16.75 16.65 -- 15.95 15.51 1530 15.46 11.87 11.86 10.82 10.38 16.55 16.44 16.21 15.88 -- 15.12 15.17 10.74 10.75 10.74 10.58 10.48 15.59 15.56 15.38 15.19 n.a. 15.78 14.70 -- 14.21 - 14.50 -- 14.26 14.00 14.19 14.09 11.88 11.79 11.66p I following the end of the statement week. The FNMA auction yield Is the average yield In a bi-weekly auction for short-term forward commitments for government underwritten mortgages; figures exclude graduated payment mortgages. GNMA yields are average net yields to investors on mortgage-backed securities for immediate delivery, assuming prepayment in 12 years on pools of 30-year FHA/VA mortgages carrying the coupon rate 50 basis points below the current FHANA ceiling. Table 2 Net Changes in System Holdings of Securities 1 Millions of dollars, not seasonally adjusted Period Treasury 2 bills net chang 4 3 ii w-5 1-year Treasury coupons net purchases over 10 510 10 1-110 1e October 4, 1982 total t witn Federal agencies net purchases over 10 510 1.5 1-year 4,361 870 6.243 -3.052 5.337 517 1,184 603 912 294 2,833 4,188 3,456 2.138 1,702 758 1,526 523 703 393 553 1,063 454 811 379 4.660 7,962 5,035 4.564 2,768 --47 131 217 133 792 45 317 398 360 428 104 5 29 - 213 24 -24 -- 2.135 2,912 2,803 115 122 80 469 607 626 164 64 165 89 182 108 836 976 979 -133 -360 --- 1982--Qtr. I II -4,329 5.585 20 -68 50 570 -81 -52 70 635 - - 1982--Mar. -1,121 - - - - - - 570 - 81 - 52 - 835 -200 - 113 - 123 -- 1,1977 -- 1977 1978 1979 1980 1981 1981--Qtr. 11 III IV Apr. May June 4,149 -324 1.7597 July Aug. 132 -2007 - 330 470 7 71 - 6917 - total Net change h outright o al total? Net Net RPs6 1,433 127 454 668 494 10,035 8,724 10,290 2,035 8,491 -2.892 -1,774 -2.597 2.462 684 --- 494 2.944 3,855 4,247 -1,352 424 3,305 - - - -4,371 6.208 -999 -5.375 - - - -1,134 1,871 -- - - - -- - - - - 4,979 -325 1.554 4,877 -6,290 -3.961 - -- --- -- 1,526 424 4,108 542 -151 -- 2007 - 200 - -- - - - 49 6,614 14 21 28 -1,432 -643 71 -- 691 - 113 -- 123 -- 998 - --- - --- --- ---- 997 1,432 -643 -3,539 348 669 4 11 18 25 -684 501 398 264 - --- -- -- ---- ---- -- --- ---- --- -684 455 398 264 -1,588 1,466 163 1,285 1982--July Aug. Sept. 1 -395- 8 15 22 - 53.7 - - - - - -396 -1.460 -- -- - -- - - - -797 -1,403 - - - - -205 -838 -- - :: :: :2j - 425 29 - - -797 -200 -200 29 LEVEL--Sept. - -- 15.8 36.0 12.3 16.3 1 Change from end-ofperiod to endof-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. -- :: 80.3 2.5 5.1 .9 .5 4i; 8.9 143.0 A .l:i$ -3.7 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 Treesury coupon issues. 6 Includes changes in RPs (+), matched sale-purchase transactions (-), and matched purchase-sale transactions (+). 4 7 Maturing -year notes were exchanged on June 30 for special 6-day bills. At their maturity, the bills were exchanged for new 4-year notes. FR 1368 (7/81) STRICTLY CONFIDENTIAL (FR) CLASS II-FOMC Table 3 Security Dealer Positions and Bank Positions Millions of dollars Underwriting yndate poitions U.S. government securltlee dealer positions Ped bills cash I coupons October 4, futures and forwards bills 1 coupons corporate bonds 1982 Member borring at FRB bank reserve positions pos M municipal bonds reees reserves adustent extended udes ca seaoal t toa 1981--High Low 15.668 540 4,633 540 -12.865 -4,535 -4.676 -2,514 595 0 562 -21 2,597 145 2,912 317 1982--High 9,335 -2,699 7.935 1,763 -11,077 8,032 -4,740 -2,300** 186 0 672 0 1,547 172 1,908 369 4,324 5,611 2,242 1,614 -10,071 -9,830 -2.972 -2,856 10 2 292 414 1.105 933 1,420 1,456 4,781 5,037 2,185 1.629 3,821 2,289 -8,575 -7,120 -5,416 -3,655 -4.307 -4,150 29 278 195 344 21 319 591 403 433 1,181 663 636 1982--Jan. Feb. Mar. 3,704 4,557 6,588 5,043 5.327 5.656 -6,344 -7,594 -6,696 -3,272 -3.173 -2,910 0 8 106 418 304 361 1,245 1.426 1,073 1.518 1.790 1,556 Apr. May June 7,721 7,390 7,286 4,846 6,713 3.791 -5,552 -10,129 -6.194 -3.402 -4,350 -2,677 23 84 20 273 359 308 1,156 706 859 1,568 1.117 1,205 17 314 312 369p 501 184 267 311 420 301 7 4 1 p 732 258 322 336 691 515 930p 1.070 559 594 548 294 326 319 260 493 172 228 397 362 645 3 8 0 p 2 42p 2 91p 296 726 1,124p 591p 3 51 p Low 1981-Aug. Sept. Oct. Nov. Dec. July Aug. Sept. July 7 14 21 Aug. Sept. 4 11 18 25 1 8 15 22 29 5,768 1,265 -1.157pa* 4,183 7,757 6,612 5,185 3,446 3,628 r 1,918p * 2,906 2,921 3,279 4,558 3,510 4,672 2.393 -1,493 3.748 4,256" 4,039 3,071 4,289. 4.629 6,496 8,032 -3,699 -3,814 -4,261 -3,280 -2,699 -348** -156** -366"** -2,219** 2,919 2,167** 132** 1,267 ** 3,103** 7.485 7,719** 7,499** 510 ** 2,524** -2,741 -2,300** " -1,434 * -810 ** -1,118** -1,432 6,266 14 5, 7p** -5,743 -4,013 -928 1.806 -3,436 -3.609 6 -1, 81p** -2,785 -3,258 -3.669 -3,861 41 U.a. 0 0 54 40 25 29 32 77 0 0 25 64 15 I __ _ _ _ NOTE: Government securities dealer cash positions consist of securities already delivered, commit. ments 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. Underwriting syndicate positions consists of issues in syndicate, excluding trading positions. _ _ _ _ _ _ _ _ 679 369 482 609 507 948 1,329p 809p 49 7 p __ _ _ _ _ _ _ _ _ _ _ _ _ Weekly data are daily averages for statement weeks, except for corporate and municipal issues in syndicate, which are Friday figures. Monthly averages for excess reserves and borrowing are weighted averages of statement week figures. Monthly data for dealer futures and forwards are end-of-month figures for 1980. **Strictly confidential FR 1369 (7/81)
@FedFRASER