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(CONFIDENTIAL FR) September 14, 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 CONFIDENTIAL (FR) September 14, 1973 MONETARY AGGREGATES AND MONEY MARKET CONDITIONS Recent developments (1) RPD's now appear to be growing around the mid-point of the Committee's August-September range of tolerance, but M1 appears to be well below and M2 is near the bottom of their respective ranges, as the table shows. In August the narrowly defined money supply experienced a small contraction instead of expanding slightly as projected, and growth of M2 at a 6-1/2 per cent annual rate was also substantially short of expectations. The smaller shortfall from target for M2 as compared with M1 reflects the continuing expansion in consumer-type time deposits, particu- Growth of Monetary Aggregates and RPD in August-September Target Period Latest Estimates Ranges of Tolerance Reserve and Monetary Aggregates (Growth at SAAR in per cent) 12.2 11--13 RPD - 0.7 M1 -- 4 M2 6-3/4--9-3/4 6.7 Statement week ave. Memo: Fed funds rate (per cent per annum) larly the 4-year wild card accounts. 10--11 10.74 The fact that RPD's are growing around the mid-point of their range of tolerance, aggregates are low, 9/12 even though the money supply stems from the Committee's decision to reduce (by two per centage points) the whole range of tolerance for RPD's relative to that shown in the Bluebook for alternative B, while dropping (by just one per centage point) only the low ends of the ranges for M1 and M2 . -2(2) Early in the intermeeting period RPD's and the money supply aggregates all appeared to be expanding at annual rates close to or above the upper limits of the Committee's August-September ranges of tolerance. By the end of August, although growth of M1 and M2 appeared to be slipping to annual rates close to or below the low ends of their ranges, continued to grow at a rate near the top of theirs. on RPD's at the last meeting, RPD's In view of the emphasis the Account Manager adopted a reserve supplying strategy early in the period under which the Federal funds rate was expected to move up toward the top of the Committee's 10-11 per cent rate range. however, RPD growth moved down into the Committee's range of tolerance, the monetary aggregates weakened further. Accordingly, Later, and the Desk did not continue to press for progressively firmer conditions of reserve availability. The Federal funds rate has averaged around 10-3/4 per cent since late August. (3) Yields on intermediate and long-term securities trended down- ward during most of the intermeeting period, substantially extending the market rally begun before the last meeting, as market participants began to believe that the maximum degree of monetary restraint had been reached. Declines ranged to around 30 basis points on both municipal and Treasury issues, and to about 35 basis points on new corporate bonds. increase in the prime rate to 9-3/4 per cent on August 27, dampening impact on this downtrend. A further had little At the same time, the general market improvement facilitated sale of a $2 billion Treasury note on August 24 and of a sizable volume of new Federal agency issues during late August and early September. Most recently, however, the bond market rally has ended, and some yields have risen, as the money market continued taut and the Board took action on September 7 raising marginal reserve requirements on large CD's. In the last two days, a number of banks raised the prime rate to 10 per cent. (4) In contrast to bond yields, to rise during the intermeeting period. amounted to 32 basis points. rates on home mortgages continued The increase in FNMA auction yields Continued upward pressure on mortgage rates is hardly surprising in view of the large further attrition in savings accounts at non-bank thrift institutions during August, and the resulting continuing low volume of new mortgage commitments. (5) Currently, most short rates are close to or at new highs, The only short rates that showed significant declines within the intermeeting period were those on Treasury bills and Federal agency securities, and even these declines proved to be temporary. The 90-day Treasury bill rate, for example, dropped below 8.50 per cent shortly after the last meeting, then rose to a new high of more than 9 per cent and most recently has traded around 8.80 per cent. Over the full intermeeting period, private short-term rates have posted further advances ranging generally from 1/8 to 1/4 of a percentage point. (6) of change) periods. The table on the next page shows (in percentage annual rates selected monetary and financial flows over various recent time -4Past. 3 Calendar Years Past 12 Months Past 6 Months '73 Aug.'73 over Aug. '72 over Feb. '73 over May '73 over July'73 Total reserves 8.4 8.6 8.9 7.5 -4.8 Nonborrowed reserves 8.8 4.0 9.2 12,7 -30.0 Reserves available to support private nonbank deposits 9.0 11.4 13.0 14.8 8.6 7.5 6.2 5.7 5.4 11.3 8.3 7.6 7.4 6.6 12.8 9.4 7.5 16.7 4.0 10.7 13.4 14.0 12.5 17.0 12.4 18.1 13.5 11.7 20.2 .9 2.3 3.0 1.8 2.5 0.1 D.0 0.1 0.6 1.3 '73 Aug. '73 Aug. Aug. Past Month over Dec. '69 Dec. '73 Past 3 Months Concepts of Money M1 (currency plus demand deposits) I/ M2 (M1 plus time deposits at commercial banks other than large CD's) M3 (M2 plus deposits at thrift institutions) -1.4 Bank Credit Total member bank deposits (bank credit proxy adj.) Loans and investments of commercial banks 2/ Short-term market paper (Monthly ave. change in billions) Large CD's Nonbank commercial paper 1/ Other than interbank and U.S. Government. Includes loans sold to affiliates and branches. 2/ Based on month-end figures. NOTE: All items are based on averages of daily figures, except for data on total instituloans and investments of commercial banks, comaercial paper, and thrift tions--which are derived from either end-of-month or last-Wedanesday-of-month Growth rates for reserve measures in this and subsequent tables are figures. adjusted to remove the effect of discontinuities from breaks in ethe series when reserve requirements are changed. -5Prospective developments (7) Given the recent weakness in money supply and the continued high level of interest rates, it now appears that the long-run target path for M1 initially adopted by the Committee last March and reaffirmed at recent meetings cannot be attained by the end of this year without an abrupt and very large decline in interest rates. If current money market conditions are maintained over the next several months, the staff would expect M 1 growth in the fourth quarter to be around 2-1/2 per cent at an annual rate. Such a growth rate would lead to a level of M1 that is some $2.5 billion below the December level implicit in the 5-1/4 per cent long-run path line adopted by the Committee. This path, extended to March 1974, is shown in the chart on the following page. (8) incorporated in The assumption of unchanged money market conditions is the specifications presented here as alternative C. This alternative includes a growth rate for M1 over the fourth and first quarters combined of about 3 per cent. The levels of M1 that would be reached in the final months of each of these quarters under this alternative are shown on the chart by the dots labelled "C". As will be noted from the chart, the shortfall from path would be expected to widen further in the first Specifications for this and other alternatives are summarized in table and spelled out more fully in the table on page 6a. quarter. the following MONEY SUPPLY AND LONGER RUN TARGET PATH RATIO SCALE, BILLIONS OF d^ 9 *8 " *A - "' *C 51 % M1 LEVEL FOR EXPECTED AT 3 J F M A M J J 1973 A S O N 0 J F M 1974 A -6Alt. A Alt, B Alt. C. Targets (4th & 1st qtrs. combined) 6 M 1 8 M2 4-1/4 6-1 6-1/2 7-1/2 Credit proxy 3 4-1/2 5 Associated ranges for September-October 1973 15-1/2--17-1/2 RPD 1/2--2-1/2 M2 6--8 Federal funds rate range -8-1/2--11 15--17 14-1/2--16-1/2 0--2 -1/2--1-1/2 5--7 4-1/2--6-1/2 10--/I 9-1/4--11 (inter-meeting period) (9) M I Alternative A specifications include a 6-month growth rate for of 6 per cent, by March. the rate required to reach the longer-run 5-1/4 per cent path This pattern is illustrated by the dots labelled "A" on the chart. To compensate for the cumulative restraining impact on money supply of recent high interest rates, this alternative implies a decline in the Federal funds rate, with an initial drop over the next few weeks to a level possibly as low as 8-1/2--9 per cent. Given the lagged relationship between money demand and interest rates, the longer that shortfalls in monetary aggregates continue, the sharper the decline in interest rates that would be needed to bring the aggregates back on path within any specific period. Accordingly, significant delays in permitting greater reserve availability would increase the risk Alternative Longer-Run Targets for Key Monetary Aggregates M3 irl 1973 1974 Alt. A Alt. B Alt. C Alt. A Alt. B Alt. C Alt. Aug. Sept. 264.0 Oct. 264.7 264.0 264.0 264.5 264.0 264.0 264.3 550.6 553.8 556.9 550.6 553.8 556.2 550.6 553.7 555.9 Dec. 267.0 266.3 265.7 563.5 561.4 Mar. 272.0 270.0 267.8 575.7 570.7 264.0 Alt. B Alt. C 862.7 869.2 873.1 862.7 869.2 872.1 862.7 869.1 871.6 559.9 885.1 880.7 877.6 565.4 905.4 894.8 885.5 A Rates of Growth Quarters: 1973 3rd Q. 4th Q. 1.2 4.5 1.2 3.5 1.2 2.6 6.2 7.0 6.2 5.5 6.2 4.5 4.6 7.3 4.6 5.3 4.5 3.9 1974 1st Q. 7.5 5.6 3.2 8.7 6.6 3.9 9.2 6.4 3.6 2.3 1.4 7.0 5.2 6.8 4.8 9.0 5.4 9.6 3.2 8.9 3.5 Alt. A Alt. B Alt. d Months: Sept. Oct. Adjusted Credit Proxy Alt. A Alt. B Alt. C 1973 Alt. A Total Reserves Alt. B Alt. C 4.0 RPD Aug. Sept. Oct. 443.9 447.3 451.2 443.9 447.3 451.0 443.9 447.3 450.9 33,905 34,174 35,450 33,905 34,174 35,419 33,905 34,174 35,383 31,967 32,371 33,286 31,967 32,371 33,255 31,967 32,371 33,219 Dec. 455.9 455.1 454.6 35,992 35,945 35,905 33,750 33,711 33,671 Mar. 464.2 461.7 458.7 36,264 36,086 35,862 34,425 34,247 34,024 14.4 11.1 8.0 14.4 14.4 10.1 4.2 15.2 i8.0 15.2 16.8 Quarters: 1973 3rd Q. 4th Q. 1974 1st Q. 11.8 7.7 7.3 11.8 Months: Sept. Oct. 9.2 10.5 9.2 9.9 7.6 5.8 11.8 6.5 3.6 9.2 9.7 Rates of Growth 10.6 10.6 15.7 15.1 3.0 1.6 9.5 29.7 -6a- 9.5 28.6 10.6 14.6 - 0.5 9.5 27.4 10.6 6.4 15.2 15,5 -7that a return to the 5-1/4 per cent path by the end of the first quarter would require easing to a degree that might lead to a subsequent unduly sharp expansion in money. (10) the aggregates. alternative A. Alternative B falls It in between A and C in terms of growth in also implies a smaller drop in interest rates than does The 6-month growth rate for M1 under this alternative is around 4-1/2 per cent at an annual rate. Thus, like C, it would represent a path that falls short of the Committee's previous long-run target, but of course the shortfall is less. (11) The short-run September-October growth rate in RPD's is very large under these alternatives, ranging around 16 per cent at an annual rate. About half of this rapid growth rate is attributable to expected behavior of CD's and non-deposit sources of funds (including about 3-1/2 percentage points that reflect the impact of the two marginal reserve actions). Only about 2 percentage points of the growth reflects expected expansion in private demand deposits, as only a slight increase is indicated for M1 in September-October, while 4-1/2 percentage points are accounted for by expansion in time and savings deposits other than large CD's. If the Committee were to decide to permit money market conditions to ease significantly over the next few weeks--e.g. a Fed funds rate below 10-1/2 per cent and clearly moving down--market expectations would be strongly influenced. A substantial decline in short-term interest rates would probably be set in motion. And long-term rates would also drop, perhaps not as much as short rates, in view of the still wide spread of though -8short- over long-rates and given the downward adjustment that has already taken place in long rates in recent weeks. If, on the other hand, money market conditions remained about unchanged from those recently prevailing, short-term rates could be expected to advance somewhat further as seasonal pressures build up during the fall. Long-term rates would probably also regain part of their recent declines. (13) Given the money market conditions of alternative C--indicated by a Federal funds rate in a 10 to 11 per cent range--growth in consumer-type time and savings deposits at banks would be expected to slow noticeably as the realignment of consumer financial asset holdings to the new rate structure tapers. M2 under alternative C may be expected to rise at about a 5-1/2 per cent annual rate in the September-October period. The market interest rates decline envisaged under alternative A and B would lead to greater growth in consumer-type time deposits than under C and hence to somewhat greater growth in M2 . Nonbank thrift institutions are expected to remain under pressure in the months ahead, assuming no change in money market conditions, but the pressures would moderate a little once the most interest-sensitive depositors have shifted out. The position of thrift institutions would ease, of course, as market interest rates decline under alternatives A and B. (14) Business loan demand at banks is expected to continue relatively strong over the months ahead, However, accmpanied by bank demand for money market funds. bank issuance of CD's should be tempered by the new marginal reserve requirement, although some bank demand will shift toward Euro-dollars and inter-bank loans. And bank credit growth is expected to moderate over the coming months from the exceptionally rapid August pace. 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 delete the word "immediately" from the phrase "over the months immediately ahead" to avoid any implication that the Committee seeks to achieve the aggregate growth rates described within a very few months. As will be noted, alternatives A and C refer to growth rates in the aggregates "thus far this year." are as follows: For the period through August, these M 1 , 5 per cent; M2 , 7-1/2 per cent; and the bank credit proxy, 14 per cent. Alternative A To implement this policy, while taking account of international and domestic financial market developments [DEL: financing], Treasury forthcoming the and the Committee seeks to achieve bank reserve and money market conditions consistent with SOMEWHAT MORE RAPID [DEL: slower] growth in monetary aggregates over the months [DEL: immediately] ahead than has occurred on average thus far this year. -10- Alternative B To implement this policy, while taking account of international and domestic financial market developments [DEL: financing], Treasury forthcoming the an the Committee seeks to achieve bank reserve and money market conditions conslower] MODERATE growth in monetary aggregates sistent with [DEL: on occurred has than immediately] ahead [DEL: over the months [DEL: average year]. this far thus Alternative C To implement this policy, while taking account of international and domestic financial market developments financing], Treasury forthcoming the and [DEL: the Committee seeks to achieve bank reserve and money market conditions consistent with slower growth in monetary aggregates over immediately] ahead than has occurred on average the months [DEL: thus far this year. STRICTLY CONFIDENTIAL CHART 1 9/14/73 RESERVES AVAILABLE TO SUPPORT PRIVATE NONBANK DEPOSITS BILLIONS OF DOLLARS 13% growth for V9 19i 3, _ 1 -3<( I A 1973 -128 1 II I I , i i I I I SI S 0 J 1972 Il I I ll lJ IV, J 1973 - 1 , J D Break in Series, Actual Level of RPD After Reduction in Reserve Requirements Effective November 9, 1972 * * RPD Adjusted to Remove Discontinuity Introduced by Increase in Reserve Requirements Effective July 19, 1973 S 0 ' (FR) CHART 2 STRICTLY CONFIDENTIAL (FR) 9/14/73 MONETARY AGGREGATES NARROW MONEY SUPPLY M1 BILLIONS OF DOLLARS -270 t it Ii II I LJI I I I I II 3ROADER MONEY SUPPLY M2 -230 600 -580 560 -540 93%% growth for Aug. - Sept -916 %growth 550 -520 teua g-i 500 I 1972 I I I I I I I I I I 1i -, -480 I \-I A M J J A 1973 SO CHART 3 STRICTLY CONFIDENTIAL (FR) 9/14/73 MONETARY AGGREGATES ADJUSTED CREDIT PROXY BILLIONS OF DOLLARS 4,70 -- 430 -1390 TOTAL RESERVES 1972 1.73 A M J J 1S-3 A *Break in series, Actual Level of Total Reserves After Reduction in Reserve Requirements E'fecttie November 9 1972 * Break in series, Actual Level of Total Peberve After Increase in Reserve Renuirenents Effertive lu y 19 1973 S 0 CHART 4 MONEY MARKET CONDITIONS AND INTEREST RATES MONEY MARKET CONDITIONS INTEREST RATES PER CENT 11 w Il I N A I A FFDLRAL FUNDS RATE / RATI S3 RESERVES I BILLIONS OF DOLLARS -1 I 1972 ORROWED 1972 3 973 1973 1972 1973 STRICTLY CONFIDENTIAL TABLE 1 SEPTEMBER BANK RESERVES (ACTUAL AND CURRENT PROJECTIONS) ---------------tmt------------ 14, 1973 ---------------------------------------------------------------- ----------------------------------------REQUIRED RESERVES I II AGRPFGATF PESFMVFS .II------------------------RFERVFS AVATLALFE FOR SEASONALLY ADJUSTED II I PRIVATE NUNRANK OEPOSITS 11 ------------------------------------ ----* --- w--------------------------1 80VIT AND CD'S AND OTHER PRIVATE I NONPOPnOWFF TOTAL I------------------------------INTERBANK NON DEP TIME OEP DEMAND I RESERVES I NON SEAS AOJ II RESERVES I SEAS AOJ -- - - - - - - - - - - - - - - - - - - - - - - -- - - - - - - - - - - - - - - - - - - - - - - (81 ( ) 6) 5) (4) 3) (2) I I (1) I I PERIOD -------- ~~IC ~-------------- MONTHLY LEVELS-SMILLIONSI ---- ----- - ---- - -I 1973--JUNE JULY AUG. I FPT. I ANNUAL RATES OF CHAN E I ---------------I qUARTERLY I I T. 1973--1ST I 20O OTY. I nI 0511 31.324 (11.967) (3375) 1 I 30,174 31.142 (31.679) (32.159) 1 10.5 1/ I II II II II I II I I I 32,460 33.569 (33.905) (34.178) II II I 30.800 3P.332 (39003) (3P?562) -7.1 17.3 8.8 5.8 II 390 QT . 1 14.5) I 10.7) ( 11. ) II I I 1 1 I MONTHLY2 1971--JJUNF JULY AIIR. SFPT. I. 14.6 .6) 15.3) I 1 .2) AUG*-<FPT.I II II II II I I I I I 1I I 4 11 18 5 JULY ( 0.6 26.9 - 4. ) 9.7) 2.5) 1 4 15 ?2 p I I 3P?24 31.696 3P.010 31.09% 3P.21 S1 32.690 31.794 I I 1 5 SEDT 2.9 2.? I I n 9) 90.2 85.4 7.7 9.9 ( 15,0) I 12 ( 101.6) 24.0 44.9 ( -30.0) ( 21.0) I ( 1 46.2 77.4 124.6) 80.7) ( I( -4.5) I ( ( 106.8) 8.6 10.1 14.7 -9.7) -2.0) ( ( 1.4 18.2) 25.1) -5,9) ( 21.9) I I I I I 32.062 31.420 31.718 31.488 31.H8 1 32.315 31.532 II I II I1 I I1 II 11 II II If II 33.501 32.578 33.849 33,808 32.126 31.647 32.853 329311 34.164 33.577 33.961 33.743 34.164 3?2578 310709 3?.*24 31.829 31.7$6 34.3R5 33.452 32.824 37.1A9 I I I I I I I I 199324 19,294 199420 20*157 7,896 7.892 7,926 7891 39256 3,338 39477 3524 2,388 2,19% 2,499 29241 209224 20.03? 19,955 19,934 19.986 7.929 79941 8*011 8,049 8,OR5 39580 3,676 3*733 3*840 3,946 1.919 1.882 1*951 2.04F 1.941 20.014 199734 89151 8S152 4.028 4.068 1.695 1.656 I II - 1.949 2#245 ( 19937) ( 1,803) I 30,965 30.147 31.100 31,492 319113 30.381 31.350 315b67 1 A4r. I 3,239 3*448 ( 3*806) ( 49062) I ----- SI------ I 1 I 7tR98 7.907 ( 8,027) ( 8195) SII I I WEEKLY LEVELS-$MILLIONS I 199126 19701 (19964) (19.930) I ------------------------------------------------------------------------------------------------------------------------------------ DATA SHOWN IN PARLNTMFSES ARE CURRFNT PROJFCTIONS. ANNUAL RATES OF GROWTH HAVE BEEN FOR CHANGES IN RISERVF REQUIRFMENT EFFECTIVE JULY 19t 1973. AnIJUSTF 1/ AT THF FOMC MEETINA AUGUST 21. 1973 THE CnMITTEE AGRFF ON A RPD RANGE OF 11 TO 13 PER CENT. NOTE: TABLE 2 -am- ---------- aa ------ a a a -a afta a a (1) I I I ------.DJUSTED CF()IT PROXY a (2) I a a I a ( a ) MONTHLY LEVFLS-$HILI IOMSI lQT3--JlNE I JULY AIIG. I I 547.4 h4,3O) ( h4.l ) ( SFPT. (53O.T) (550.6) SEPTEMBER 14, 1973 MONETARY AGGREGATES CURRENT PROJFCTIONS, SEASONALLY (ACTUAL AND ------~-------------------LI---------------I MONFY SUPPLY I adOow I HUOAD PF 10) I (M ) I (M?) STRICTLY CONFIDENTIAL I 434.5 437.7 (443.4) (447.3) - -----II U.. I II GOVT I II DEPOSITS I a a a I II II II I II II aa--a ADJUSTFD) ft-- -------ft ---t- -TTME AND SAVINGS DEPOSITS I NONDEPOSIT I OTHER I I SOURCES OF TOTAL I THAN CD'S I CO'S I FUNDS a a a a a a a a a a a (4) (5) (6) 5.1 3.4 ( 4.2) ( 5.2) 344.1 347.7 (3536) (356. ) ?R2.0 243.3 (PA6.6) 1 (?9.) I I I a a a a a a a aat---t--ft--- (7) 62.0 64.5 (6700) (67.2) 5.o 6.5 ( 7.1) ( 7.1) II II II PERCENT ANNUAL GROWTH oUAMRTRLY I if II Pn I T, 1973--IST 5.7 (.5 I ()TN. 4nfr (o 1.7 . IT ( h.) 15.0 12.2 I (11.6) MONTHI Y 9.5 B.7 23.1 16.0 1 II II II II (1 11) (14.0) 11 19Q7--JUNE 12.4 I 4.1 I I 12.6 (? .4) (11. ) I .1l 5.5 (14.0)1 (13 4) I (J5*4) I (13.8) I I 213.0 282.4 P?3.2 2P3.4 631 63*9 64.4 65*4 5.9 6.3 6*5 6.8 1 I 284.6 25.5 285.9 287.2 287.2 65*5 66*2 67.3 67.4 67.6 6.8 6.5 7.3 7.2 75S 286.2 289.4 I I 67,1 67.1 7.2 7.0 10.4 11.1 s4( (17.0) iJULY ALIG. I SEPT. I (-1.4) ( 0.0) ( 6.6) (-0o7) ( 6.7) ( .R) 11 II 1 I AURG.-cPT. WEEKLY LEVELq-4TLLTO --- S I I *--**-------------JULY 264.5 4 11 18 P9 I pta*.S I I I 'i47,4 566o6 546.0 5471. 43.7) II 3.1 436.7 437.0 II II 3.1 2.5 5AH.4 2b3.O 264,4 1I Auj ,3P? 15I ?2 762.9 SEPT S PI 12 PF( ?63.A 263,3 I --- *- -******-------- NOTE: OATA I 1 549.1 50.3 SZ.1 5( .? 552.0 552.7 I I I I I1n? -------- 445.1 444.9 443.2 I 1 346.1 346.3 347.6 34.7 4.6 4.? 3.4 350.2 351.7 353.2 354.6 354., 4.4 '. 355.3 156,5 I I 1 II 445.1 446.8 II 1I II m----*---*-- SmOWN TN PAPRNTMFQS ft------ *_-----*--- 4E CURRFNT POOJECTIONS. -* -* *-***--- P PE - ***-*--** --**---* PRELIMINARY PARTIALLY ESTIMATED STRICTLY CONFIDENTIAL (FR) SEPTEMBER 14,1973 Table 3 RESERVE EFFECTS OF OPEN MARKET OPERATIONS AND OTHER RESERVE FACTORS (Millions of dollars, not seasonally adjusted) --- e i-- rket QOerations Period ills .&Accept Coupon Agency Issues sues /1 Daily Average Reserve Effect 2/ Total RP'e 3 / Net - (1) (2) (3) 659 1,109 1,332 -506 649 1,073 -753 196 -207 -228 27 -- -18 -14 -19 -21 209 168 -20 -193 542 -414 -942 -1,148 -143 644 1,636 1,106 -1,470 1,085 2,416 -915 146 1,69 1,323 1,437 -1,450 2,090 July 4 11 18 25 464 380 -432 21 228 27 --- ---168 2,699 3,390 -5,499 -5,093 3,629 3,193 -656 -466 1,937 -793 750 -22 1 8 15 22 29 788 -198 -515 -473 253 --351* .351* -- -----17 952 1,740 -4,165 -4,363 -59 -223 3,406 2,582 -918 -682 674 -1,019 -931 394 Sept.5 12 19 -228 -417 169* -5 -26 (4) (5) a M Open arket Operations Member Other 4/ Bank Borrowing Factors (6) ., in resere categries res. res. against available res. 5/ U.S.G. and interb. (6)+(71+8)-(9) (7) (8) 428 265 -137 66 1 263 -1,794 -1,723 -884 -1,392 1,084 -850 -109 156 -74 45 -470 318 -1.111 75 376 66 105 1,185 554 -722 40 361 -1,387 694 926 -235 618 -3 263 -288 486 -818 953 392 -346 46 74 3 -150 570 -642 298 -230 368p -133p 53p 459p -778p (9) (10) T available reserves 5/ (I1) oncthly 1973 -- Feb Mar. Apr. May June July Aug. Sept. Oct I -1,146 -46 505 200 175 795 680 415 Weekly 1973 -- Aug 158 -619 -75 -893 p* 14 -89 -92 219 42 5p p* -2,683p* -196p -875p 4 87 5 30 -464 512 1,395 -840 6 - 94p 2 -8p ,833p 26 It 6-----------------*.c~r. n oys L prcse.Is c ane - ~ - Im portiuo i -_ r... LL r h .. i . enU-o .. 1A -periou .A to ena-oT-perio; viv L I . inctLUes redemptions in regular oILL auccttns. Iepresents change in daily average level frno preceding period. Ifcludes matched sale-purchase trahsactions as well as RP's. Suft of changes in vault cash, currency in circulation, Treasury operations, F R. float,gold and foreign accounts, and other Fk accounts. feserves to support private 6onbank deposits. Target change for August and September reflects the target adopted at the August 21, 1973 FOWC meeting Target change for previous months reflects the bluchbok patterns that are consistent with target ranges that were adopted during the motth. *Ihcludes effect of special certificate (i.e., borrowing by Ireasury from FR). CONFIDENTIAL (FR) SEPTEMBER 14 1973 Table 4 SECURITY DEALER POSITIONS AND BANK RESERVES Millions of dollars U.S. Security US. Govt. Govt. Security Dealer Poetions Bills Coupon Issues Period Dealer Positions Member Bank Reserve Positions Corporate Municipal Excess** Bonds Bonds Reserves (1) (2) (3) (4) (5) Borrowings at FRB** Total Basic Reserve Deficit Seasonal (6) (7) 8 New York 38 Other (8) (9) 1972 -- High Low 4,291 1,916 1,585 -91 235 0 383 40 796 -133 1,223 12 -5,635 -1,638 -5,720 -1,910 1973 -- High Low 3,718 897 1,175 -96 175 0 244 36 631 -86 2,558 688 -5,243 -1,831 -7,267 -4,048 2,643 4,099 692 170 114 53 176 174 255 162 438 514 -3,913 -3,835 -2,801 -4,024 2,887 3,096 3,510 207 1,039 953 105 84 58 132 191 291 247 314 219 574 606 1,049 -3.637 -4,561 -4,977 -4,044 -3,622 -4,958 3,407 2,132 2,490 720 562 - 50 27 77 24 177 123 125 289 207 177 1,161 1,594 1,825 -4,550 -4,187 -4,273 -5,469 -5,436 -5,847 Apr May June 2,457 1,894 2,281 106 421 562 12 66 33 60 151 120 255 161 234 1,688 1,843 1,851 3 30 75 -3,293 -3,019 -3,507 -6,577 -5,872 -6,443 July Aug 1,425 265 24 0 139 70 285 177p 1,953 2,165p 155 16 3p -2,460 -2,689 -6,106 -4,940 1973 -- July 4 11 18 25 2,013 1,382 1,472 1,362 391 373 328 234 0 77 10 10 134 129 144 148 631 -20 461 34 2,402 1,680 1,720 2,081 111 117 117 128 -2,771 -2,860 -2,202 -2,374 -o,137 -7,267 -6,651 -5,176 Aug. 1 8 15 22 29 1,193 897 2,060 58 112 -18 0 0 0 0 0 86 53 59 75 79 499 74 316 42 145p 2,095 2,006 1,914 2,133 2,558p 141 158 148 163 185p -2,262 -2,315 -2,673 -3,559 -2,681 -4,725 -5.372 -5,941 -4,736 -4,048 36 52 p 0 5 2p 7p 2 16 8p 145p -2,060p -3,572p -4,18 8p -6,181p 1977 -- Aug. Sept. Oct. Nov. Dec. 1973 -- Jan Feb Mar Sept.5 12 19 15 Op ,36 2p 1,487p 26 Government Security dealer trading positions are on a commitment basis. Trading positions, which exclude Treasury bills financed by repurchase agreements maturing in 16 days or more, are indicators of dealer holdings available for sale over the near-term. Other security dealer positions are debt in syndicate, excluding trading positions. The basic reserve deficit is excess reserves less borrowing at Federal Reserve less net Fedissues still eral funds purchases. Weekly data are daily averages for statement weeks, except for corporate and municipal issues in syndicate which are Friday figures. **Beginning with January 1973, monthly averages for excess reserves and borrowings are weighted averages of statement week figures. Notes: CONFIDENTIAL (FR) SEPTEMBER 14, 1973 Table 5 SELECTED INTEREST RATES Per cent Treasury bills Period Fedral k1. 177 -- -- 1972 -- 1973 -- (4) 9- .* 5.52 3.60 5.50 3 75 5.38 3.13 High Low 10.79 5 61 8.95 5.15 8.43 5.42 10.50 10.50 5.38 10.75 Aug. Sept. 4.80 4.87 4.02 4.66 4 90 5.44 4.75 5.07 4.65 4.78 4.88 5.00 Oct. Nov. Dec. 5.04 5.06 5.33 4.74 4.78 5.07 5.39 5 20 5.2A 5.21 5.18 5.40 5.00 n 5. 5 19 Tan. Feh. Ma r 5.94 6.58 7.09 5.41 5.60 6.09 5.58 5.93 6 53 5.76 6.17 6.76 Apr. May 7.12 7 84 8.49 6 26 6.36 7.19 6 51 6 63 7 05 7.13 7.26 10.40 10.50 8.01 8.67 7.97 8.32 10.21 9.52 10.22 10.58 7.69 7.87 7.85 8.14 1 10.57 8.28 8 15 10.39 10.39 10.52 10.79 8.48 8 89 8.81 8.59 10.79 10.74 8.69 8.95 lune -- . -" (3) 1isue-NYC 5.11 3.03 July Aug. 1973 (L) CD's New 60-89 5 38 3 18 li gh Low 1973 fund-e SfPaper Short-term 90-119 day Commercial uIly 4 11 18 25 Aug. 22 29 Sept.5 12 19 26 __ i____________' : 1 Aaa Utility New Recently Is sue offered (7) 7.60 6.99 Long-term MuniU.S. Municpa Bor _ _ _ (9) Government (10-yr. Constant maturity) (10) FNMA Auction Yields (11) 5.54 4 96 6 58 5.87 7.72 7 54 8.52 7.29 8.30 7.26 5.59 5.00 7.54 6.42 9.27 7.69 7.37 7.40 7.34 7.42 5.30 5.36 6.21 6.55 7.63 7 65 5.19 5.13 5.38 7.38 7.09 7.15 7.38 7.18 7.18 5.19 5.02 5.05 6.48 6.28 6.36 7.72 7.71 7.68 5 63 6.16 6 78 5.75 6.28 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 6.75 7.41 8.13 7.48 7 51 8.00 7 04 7.44 7 98 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 9.26 10.26 9.09 10.25 9 19 8.01 8.36 7.97 8.22 5.40 5.48 7.13 10.40 8.46 8.83 7.62 7.65 7.75 8.24 8.56 8.88 9.10 9.58 8.63 7.80 7.85 7.94 8.12 5.34 5.40 5.37 5.48 7.0? 7.05 7.09 7.24 8.43 8.41 8 41 8 27 9.85 9.88 10.13 10.38 10.00 10.25 10.50 8.28 16.38 10.56 10.50 8.24 5.59 5.58 5.47 5.44 5.34 7.48 7.54 7.41 7.33 7.26 8.02 5.18 7.13 5.18 18 8.20 5.63 10.08 10.25 10.25 10.43 9.06 9.13 9 63 5.50 8.75 9.00 9 25 '9.75 7.92 8.03 8.31 8.52 8 36 8.29 10.75 8.22 10.50 10.50 10.75 8.33 10.56 10.50 10.75 L ______.............. 7.92 ____________.._ 7.94 7 ______ .76p 8.30 8.16 8.21 8.02p 7.40 7. 8.38 8.54 8.71 8.95 9.27 p ________ Weekly d a for columns 1 to 4 are statement week averages or daily data. Columns 5 and 6 are one-day Wednesday quotes. For columns 7, 8 and 10 the 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. statement week. Column 11 gives FNMA auction data for the Monday preceding the end of the statemen t week. The FNMA auction yield is the average yield in the bi-weekly auction for short-term forward commitments for Government underwritten mortgages. Appendix Table I CONFIDENTIAL (FR) RESERVES AND MONETARYVARIABLES September 14, 1973 Monr Stock Measures __eserve Period Total (1) Nonborrowd (2) Avaiable to Support Pvt. Depoite (3) 1 ( 2 (5) 3 (6) Bank Credit Masauree Adjusted Totsl Loans and Credit Proxy Inatment (7) (8) Total Time (9) Time Other than CD's (10) Other Thrift Insattution Depoittel (11) CD'a (12) 1.S. Nondeposit Cov't. Funde IDand (13) (14) (Dollar Change in Billions) (Per Cent Annual Rates of Growth) Annually* 1968 1969 1970 1971 1972 +9.3 +2.6 +8.6 +11.4 +10.8 +8.3 +2.9 +8.0 +13.5 +13.0 +10.1 +3.0 +14.9 +7.4 +8.6 +10.4 +7.7 +8.5 +11.4 +19.3 +14.3 +4.3 +3.6 -7.1 -0.4 -1.4 +1.1 +13.7 +12.1 4.17.3 +15.4 44.4 +5.7 -0.3 +0.6 40.4 +20.0 +9.2 +11.6 +18.9 +1.2 -1.4 +9.7 +11.1 +9.8 +16.6 +8.0 +15.9 +14.5 +13.5 +1.7 +1.8 -0.4 +1.1 +11.0 +11.5 +9.8 +12.1 +15.7 +9.5 +13.9 416.4 +15.4 +14.8 +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 -0.4 +0.5 +15.0 412.2 +1-.4 49.8 +23.1 +16.0 +9.5 +8.7 +13.6 + 9.3 +9.6 +11.6 +11.2 +1.4 +11.1 +16.7 '+13.3 +16.4 +9.8 +10.1 +8.4 +11.5 +10.6 +21.6 +13.4 +20.0 +12.1 +10.8 +10.3 +13.0 +12.1 +11.4 +11.1 +12.8 +15.5 +15.6 +14.5 +6.0 +7.7 +9.1 +13.8 +16.3 +1.2 +3.6 +4.1 +1.9 +6.0 +8.7 48.9 +10.5 +10.4 +6.6 +9.9 +10.6 +9.2 +6.1 +12.7 +8.5 +10.3 +10.2 +14.9 +10.7 +12.4 +11.5 +8.1 -1.7 +8.6 +7.2 +9.7 let Half 1971 2nd Half 1971 +9.7 +.4 +9.6 +6.3 +10.7 +3.4 let Half 1972 2nd Notf 1972 +11.7 +9.0 +12.1 +2.0 lot Half 1973 +7.4 4.49 1971 1971 +6.5 +2.3 +6.6 +6.0 1972 1972 1972 1972 +10.6 +12.6 +3.6 +14.2 +10.7 +13.1 -0.8 +4.8 let Qtr. 1973 7n ntr. 1973 +8.8 +5.8 +7.8 +3.6 +6.0 +6.6 +8.3 -0.6 +0.5 +1.1 -0.3 +0.4 +2.6 +13.0 -8.4 -7.6 40.4 +11.5 -4.8 +17.9 +18.2 415.5 +5.3 -2.8 +9.6 +8.1 +7.1 + 6.3 + 3.6 + 7.1 +17.4 +17.0 +2.9 -12.4 +14.4 +7.7 +10.1 +11.0 +3.9 +8.1 +11.3 +14.6 +7.5 -1.1 +6.1 +7.2 +10.6 +9.5 +0.4 +8.2 Semi-Annually" Quarterly' 3rd Qtr 6th Qtr lst 2nd 3rd 4th Qtr. Qtr. Otr. Qtr. -7.1 +10.5 417.3 412.0 +8.2 +8.6 +1.7 +10.5 +5.7 4..5 +9.6 49.4 +6.7 +9.8 +11.7 47.1 +0.4 +0.3 -1.1 +0.5 +0.7 +1.6 +0.9 1972- Jan. Febh. MBT. lar. Apr. May Tulle Tuly Aug. Sept. Oct. Nov. flee. 1973: Jan. Peb. Mar. Apr. May sun* July Aug.p +21.8 -5.2 +14.5 +22.1 +8.8 +6.4 +5.2 +7.6 -1.9 +18.2 +11.4 +12.5 +26.7 -5.7 +11.0 +21.7 +9.4 +8.0 12.9 +0.7 -6.1 +15.5 +9.8 -10.9 +11.0 +6.5 +13.4 +6.8 +3.9 +9.0 +6.9 +9.7 +12.9 +35.8 -22.1 +13.3 +12.3 +4.4 +6.6 1 +26.9 -4 8 +31.3 -41.3 -10.5 +26.1 +1.1 +24.0 +44.9 -30.0 +22.8 -4.7 +13.4 +9.6 +9.4 +16.6 +18.6 +8.6 43.2 +20.8 +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 +14.2 +12.4 +19.9 +5.4 +20.0 +2.3 +9.0 +17.9 +14.4 +10.7 +21.2 +16.7 +17.7 +16.2 +11.6 +12.8 +18.2 +12.9 +13.6 +15.9 +12.0 +11.5 +16.2 +17.1 +19.2 +15.4 +13.2 +7.8 +13.0 +11.4 +12.3 414.0 +10.2 +12.8 +10.4 +11.2 -0.5 +6.1 -0.5 +7.5 +10.7 +12. 4 45. 0 +46.4 +5.9 +4.7 +8.1 +9.8 410.4 +5.1 +6.6 +9.8 +9.0 +6.9 +8.4 +9.1 48.3 +16.4 +19.7 +13.1 +12.1 +15.4 +20.3 +18.7 +6.4 +19.0 +3.8 +10.8 +20.2 +15.7 +21.6 +30.9 +21.0 +18.2 +12.9 +5.7 +9.6 +8.7 +9.1 +8.1 +5.5 +14.0 -1.4 410.4 +11.1 +5.6 +4.0 + 8.8 +17.0 48.1 +12. 6 +20.4 +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 +0.1 +0.6 +0.1 +1.5 +1.5 +0.7 +0.8 +0.8 +0.8 +0.2 +1.2 +1.9 -0.1 -0.3 +0.1 -0.2 +0.2 +6.3 -0.1 +0.2 +0.1 +0.1 41.2 +4.5 +6.1 +3.8 +3.1 +0.3 +2.4 +2.5 +0.4 +0.2 40.3 +0.2 +0.9 +0.6 -1.7 +1.1 +0,7 -1.3 -0.7 +0.6 +1.2 +0.6 -0.6 "0.6 +0.1 +6.3 -1.7 -1.2 +0.5 -1.7 +0.8 a_ Preliminry. N .* Reserve requirements ofn lurodollar borrnwingr are included behtning fetober 16. 1969, and requirements on bank-related commercial paper are Included beginning October 1, 1976. 1/ Crowth rateg are based on estimated monthly average levels derived by averaging end of current month and end of previous month reported data. Appendix Table II RESERVES AND MONETARY VARIABLES (Seasonally adjusted, billions of dollars) CONFIDENTIAL (FR) September 14,1973 ANNUALLY: nec. 1969 Tec. 1970 Dec. 1971 MONTHLY: 1972--July Aug. Sept. Oct. Nov. Dec. 1973--Jan. Feb. Mar. Apr. May June July Aug. WEEKLY: 1973--July p 4 11 18 25 Aug. 1 8 15 22 29 p Sept. 5 p p - Preliminary VOrE- beginning Reserve requirements on Eurodollar borrowings are included beginning October 16, 1969, and requirements on bank-related commercial paper are included commercial paper, and Eurodollar October 1, 197C. Adjusted credit proxy includes mainly total member bank deposits subject to reserve requirements, bank-related nonbank commercial paper figures which borrowings of U.S. banks. Weekly data are daily averages for statement weeks. Monthly data are daily averages except.for are for last day of month. Weekly data are not available for M,. total loans and investments and thrift institution deposits. 1/ Estimated monthly average levels derived by averaging end of current month and end of previous month reported data. APPENDIX TABLE III Growth Rate in Money Supply (Per cent change at an annual rate) 1971 1972 1973 M Q M Q M Q 8.9 6.3 17.1 13.7 18.0 14.8 11.1 11.2 12.1 14.8 14.1 16.3 4.1 7.1 6.0 8.2 8.9 10.6 1.9 2.2 8.7 7.4 10.4 9.6 9.2 5.3 11.1 14.9 13.2 6.1 8.4 10.0 10.7 12.1 8.2 8.0 10.3 10.3 12.3 12.2 8.6 7.1 10.2 11.4 11.4 1.7 4.7 5.7 7.7 8.8 6.9 9.5 7.8 9.4 10.3 12.7 8.5 9.5 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 8.5
@FedFRASER