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\. DIVISION O F I N T E R N A T I O N A L F I N A N C E IT H. 13 BOARD OF GOVERNOR# — F E D E R A L R E S E R V E SYSTEM BR lay I No. 71j x ' AUG i s !FEnn:>.,, 7 August 10 5 1962 J962, CAPITAL MARKET DEVELOPMENTS ABROAD 1 fr. Canada I I , Nine Charts on F i n a n c i a l Markets Abroad I,. Canada s Money and Capital Markets i n July . Funds began moving i n t o Canadian markets i n s u s t a i n e d volume during July and o f f i c i a l r e s e r v e a c c r u a l s amounted t o $306 m i l l i o n f o r the month * The i n f l o w was c h i e f l y made up of the unwinding of e a r l i e r s h i f t s i n commercial t r a n s a c t i o n s ( l e a d s and l a g s ) a g a i n s t the Canadian currency. In a d d i t i o n / some f o r e i g n funds are reported t o have moved i n t o Canadian commercial paper which o f f e r e d a f u l l y - h e d g e d y i e l d of about 3 , 6 0 per c e n t , i n t o Treasury b i l l s which o f f e r e d a y i e l d (without forward exchange cover) of about 5 - 1 / 2 per cent f o r the 3-month and of 5 . 6 9 per cent f o r t h e one-year b i l l and perhaps a l s o i n t o Government of Canada bords„ Credit c o n d i t i o n s remained t i g h t throughout J u l y , .The chartered banks had t o borrow from the Bank of Canada $26 m i l l i o n i n the week of June 18 and $53 m i l l i o n i n the week of July 2 3 . Short money r a t e s had a g e n e r a l l y r i s i n g tendency e a r l y i n t h e month but began to ease l a t e i n J u l y . The 3-month Treasury b i l l y i e l d reached a peak of 5 » 5 l per c e n t on July 19 and eased"to 5 . 3 9 per cent on August 2 as t h e Bank of Canada acquired s i g n i f i c a n t amounts of b i l l s i n the l a t t e r p a r t o f " J u l y , Bond y i e l d s were maintained throughout the month* The y i e l d curve on Government of , Canada s e c u r i t i e s remained v i r t u a l l y f l a t a t around the. 5 - 1 / 2 per cent l e v e l or roughly about 20 t o 50 b a s i s p o i n t s above the l e v e l a p r e v a i l i n g b e f o r e the emergency a u s t e r i t y measures announced on June Market y i e l d s on Treasury s e c u r i t i e s ( i n per cent per annum) i n r e c e n t weeks have been2 Treasury b i l l s ; 3 months 6 months Bonds % I96I4 (May) 1965 ( S e p t , ) 1967-68 1975-78 1979 1996-98 April 12 June 6 20 27 July 18 August 1 3.0L 3,2k 3,62 3,83 Lo92 5.26 5el|5 5.73 5.51 5,74 5.39 5.62 3,58 3,93 L.13 . in 80 . L.05 Wo W 1 U.9U L.95 U.9U 5.12 5C2 U»7U 5.07 5.05 5.oU 5»3U 5.55 5.11 5.23 5.26 5.13 5,76 5.58 5.11 5.L2 5.L8 5.15 5.75 5*58 5.03 5 »4U 5.18 5.19 b*ll W8 NOT FOR PUBLICATION DECONTROLLED AFTER SIX U01JTES NOT FOR PUBLICATION Continued, heavy s a l e s of bonds by the chartered banks to finance t h e i r loan expansion put s u b s t a n t i a l pressures on bond y i e l d s . In a d d i t i o n , the Bank of Canada o f f s e t i t s purchases of Treasury b i l l s a f t e r mid-July by s a l e s of bonds. During the month , the chartered banks sold $350 m i l l i o n of bonds and the Bank of Canada $3U m i l l i o n . ' Nonbank investors found government s e c u r i t i e s a t t r a c t i v e at prevailing y i e l d s » During July, they acquired $315 m i l l i o n of bonds and 0132 m i l l i o n of "Treasury b i l l s . These f i g u r e s include purchases of both residenT-s and nonresident s» Yields continued to edge up i n the corporate and lccal'«gc ''eminent s e c t o r s of the bond market. Long-term y i e l d s i n these s e c t o r s of the market ( i n per cent per annum) were 2 . 1962 April 30 May 31 June 2 9 July 31 10 10 10 10 U0 Provincial Municipal rublic u t i l i t i e s . Industrials Bond yielcLaverage 5.19 5.38 5.17 5.15 5.22 5.1(3 5.65 5.27 5.39 5.Wi 5.67 5.98 5.70 5.71 5.77 5.87 6.17 5.71 5.77 5.89 At prevailing y i e l d s , Canadian l o c a l governmen-tL.units have again become i n t e r e s t e d i n borrowing i n the United S t a t e s . In the month ending June 30, A, Eo Ames & Co. reported Canadian corporate and local-government borrowings i n t h i s country a t §37*6 million» / " . , ' ' ' . ' . ' - '' .. - . ; y \. " . ' ' Demands f o r banx loans continue strong a t the prevailing 6 per cent prime r a t e . For the seven weeks prior t o July 11, bank loans increased by 5510 m i l l i o n but they declined $36 m i l l i o n i n the two weeks ending July 25 • I t i s as y e t too e a r l y t o have any i n d i c a t i o n of the impact of the- June 2U . a u s t e r i t y .nea cures upon Canadian business developments. ' • Honey market. Short-term i n t e r e s t r a t e s on the Canadian money market continued t o r i s e s l i g h t l y during the f i r s t h a l f of July from the preyious high a t t a i n e d i n l a t e June, and then declined somewhat during the l a s t two weeis of t h e :ionth= The r a t e on 3-month Canadian Treasury b i l l s rose from 5.U5 per cent on June 28 to a high of 5»5l per cent on July 19, then declined t o 5*39 per cent- on August 2 , (See Table and Chart 1»). The rate- on 6-month Treasury b i l l s hovered near i t s June 27 l e v e l of 5 . 7 3 per cent, and then d e c l i n e d t o 5.62 per cent on August 2, ^ The short-term money market i n Canada has been held t i g h t — p a r t i c u l a r l y during the f i r s t h a l f of July—by s u b s t a n t i a l net s a l e s of Treasury b i l l s by both the Bank of Canada and the Canadian chartered banks, (See Table.) The Bank of Canada s o l d ^56 m i l l i o n during the last, week of June, and another $23 m i l l i o n during t h e f i r s t two weeks of July. However, the Bank cf Canada acquired S53 m i l l i o n i n Treasury b i l l s i n the l a s t three weeks of July. The NOT FOR PUBLICATION = 3 = NOT FOR PUBLICATION chartered banks remained s e l l e r s of Treasury b i l l s during most of June and J u l y = ~ s a l e s amounted t o $152 m i l l i o n between June 6 and J u l y 25 „ During the week ended August 1 , however, purchases of $6U m i l l i o n of b i l l s by t h e chartered banks c o n t r i b u t e d t o the e a s i n g of the short-term market, the l a r g e s t a c q u i s i t i o n f o r any week i n 1962. A f t e r a d e c l i n e during, mid«=June and a jump l a t e i n the same month, the covered a r b i t r a g e i n c e n t i v e i n f a v o r of the Canadian Treasury b i l l a g a i n s t the UoS„ b i l l remained during most of July a t about the same l e v e l i t occupied during l a t e May--about o n e - h a l f of 1 per cento (See Table and Chart 1») E a r l y i n July 3 forward Canadian covering was reported t o be somewhat l i m i t e d i n a v a i l a b i l i t y o The covered a r b i t r a g e i n c e n t i v e i n favor of the Canadian b i l l dropped t o 0.i|2 per cent on June 2 6 , and then rose t o 0 . 6 8 per cent on August 2 . The spread i n favor of Canadian f i n a n c e paper widened as f i n a n c e paper r a t e s r o s e with other s h o r t - t e r m r a t e s i n l a t e June, and some funds r e p o r t e d l y flowed i n t o Canada from abroad* Comparative y i e l d s on 30-to~89 day paper f o r leading houses ( i n per cent per annum) were as f o l l o w s § . 5 T" June 15 29 July 6 2k Canada 3.50-3.75 5.50 5.25-5.50 . U. S . Spread 2.88-3.00 , 3.00 3.13 3.00 0.69 2.50 2.55 90-Day Forward Exchange -1.02 -1.90 "1.89 -1.95 Net Incentive -0.33 •*0.60 +0.66 Bankers" acceptance market 0 A move to broaden the Canadian money market with the i n t r o d u c t i o n of a market f o r bankers 8 acceptances on June 1 1 was reported i n "Capital Market Developments" f o r May and June, dated J u l y 6® While the i n t r o d u c t i o n did take p l a c e on s c h e d u l e , the new medium was introduced i n an atmosphere of i n c r e a s i n g short-term money-market r a t e s so t h a t the new market was not able t o s t a r t f u n c t i o n i n g 0 Acceptances were t o be o f f e r e d i n the money market beginning June 11 i n v a r i o us denominations from $200,000 t o $ 1 , 0 0 0 , 0 0 0 f o r terms ranging from 30 t o 90 d a y s . At the time of i n t r o d u c t i o n , i t appeared t h a t t h e s e acceptances could s e l l on t h e market f o r y i e l d s approximating U per c e n t . A f t e r allowing a 1 - l / U per c e n t bank charge f o r guaranteeing the paper, i t would s t i l l be p o s s i b l e f o r a borrower t o obtai n short-term funds a t a c o s t of about 5 - l / U per c e n t , which was below t h e 5 - 1 / 2 per cent prime lending r a t e of the banks then p r e v a i l i n g , , This s i t u a t i o n , however, l a s t e d f o r only a v e r y few days during which d e a l e r s estimated a t o t a l of o n l y two or t h r e e acceptances were issued* T h e r e a f t e r , r i s i n g s h o r t - t e r m . i n t e r e s t r a t e s made acceptances a more c o s t l y source of funds ( a f t e r accounting f o r the charge by banks) than loans d i r e c t l y from banks» The i n c r e a s e on June 25 from 5 - 1 / 2 t o 6 per. c e n t i n the prime lending r a t e by chartered banks,. moreover, has not been s u f f i c i e n t to r e v i v e the acceptance market e With t h e prajne r a t e now equal t o the maximum lending r a t e of the chartered banks under Canadian law a t 6 per c e n t , an acceptance must s e l l t o y i e l d something NOT FOR PUBLICATION =» 1* = NOT FOR P i m i O A T i # l e s s than L-3 per- cerr i . a f t e •' a l l o w i n g f v r ".ne 1~1• u p e r '-.en"; charge b y t h e bank f c r a c c e p t a n c e ) Lf x 2= t c ha","? ? ay eta an"age o r e r borrowing d i r e c t l y f r o m t h e banko _Ihi5 max-L/num r a " : ; , ir. t,arv- wel_ e v e r 1/2 p e r s e n t l e s s t h a n t h e y i e l d s a t whicr l ^ - i a y 0 m i d j s " ^ -asury h i l l s have "been s e l l i n g , The b a n k s - ac , ? p t a n : e i=> f c r tr.e p r r c e i r » m e r , s i-ju5-4-'«a-?-=d cy u n f o r t u n a t e t i m i n g 5 ir,s r o l e m t h e Canadian money market ••mu'.u. develop only a s and "when a s i g n i f i c a n t d r o p o c c u r s i n t h e 3+rupture cf s n c r t - t e r m i n t e r e s t r a t e s , / :' ' \ B y d Jarke"<>7 Bord. y i e l d s t / r - t g r : • r July v er^ l i t t l e changed f r o m late.-.runs l e v e l ? , Trip:yieia lurve -Ocv-t: raer t- of Canada s e c u r i t i e s remained very nearly f l a : p e c cccL 0 a b c u : „..'L = ™ •''? p e r c e n t a t eve m a r k e t p r i o r t c the beginiiu-g -:i t r r g-.r, y program, on Jane. 2k* - \ B:nd y i e l d s fie:e 3 u o j e v . -u- s t s . •-.:*! p r e s s o r ? thocgnc .1: t n e month a s c h a r t e r e d nank.3 re:-y hea-rj - i n g i f Gc«-^r-nment bonds t o f i n a n c e g e n e r a l loanyijq: a n s i on, Tnese a j a u n t e d irn' 11 cn f-^r t h e month of J u l y , These prSSBUT-S were augmertea. a:-. tr.e Ear-K c i Canaia o f f s e t - T r e a s u r y b i l l purohaper s a l e s r-f § y -f-V l i - v Oc "e^'jr-:"-- b c r d f dur.tng t h r l a s t two weeks c f t-he rriontn 0 Wcribanic m*.esto^? f c i i r a pr---a. I i r g y i e l c ? ?uff 2.:-.Le'ntly a t t r a c t i v e t c a c q u i r e , d u r i n g «?uiY* $>1? % ; 1 " : * ' . r 3r r o r d ? snd ar-othe? $132 million i \ Treasuxy'bills• , Y i e l d s i r . rh^ -,:.'p.:ravs- v.d . market .co^-inuftd t-_ edge Lpvrara„ By s e c t o r s vApv--, e :i bv M:Lecd^ Vi«^e f c r p u b l i c - i t i l i t - e s t o 6 , 2 ' pe» . :•'** : .^-gr. T.er. : the tend en:' ..'uly 3 y i e l d s ,.n -h*>s?, ii". C.nrp-.Cj r a n g ^ i trcra per cent a--r.zv 1 pa." '»e- Sigiiz a~e a p p e a r t . .ha" - h a -> stru.-t-ur« of 3.£22g»tem l a t e r e s t r a t e s may he f c ' i n g some pr- . 1 : a - " i r u n l ' l p a l g0VBfoments o u t of t h e Canadian m a r k e d Alberta 8 .=5 d6pu3 x ;-;ivasu.^e- s fc- ex5Jipl6, anncisnoed on J u l y 26 t h a t t h f Go'vernift?^ 1 ,% 4.1nsr a w: _U r.cv, t>:r-r.-y at. 6 p e r c e n t , and t h a t an i s s u e c 3 -L-^15 r - I l i o . * piar^n-^ t c - A^gusr, would ce poit.poned a t l e a s t u n t i l t h e ye-di-c-nr. aue t . tr-t? r.igL ir-;«r :-e-1 race?-, l b a p p e a r s l i k e l y t h a t many l o c a i u n i t s i n siorr^ av str-a r:-£ r-~ ' Ir c r e a s i n g i> \cck t"C t h e U0S<, ^.-'fharket f c r l>?vfer-'-c2t c a p i t a l , fne Gc "e^rjRen: ; B y l v l 3 h Columbia d u r i n g r July. bsrrow^d $L.S i r . i l l i c n Id V 0 5 e 5ncr""-.fr.T f u n d s i r . two 3 a l e t .-f 6-moriui ii-j./2 p e r c?er,t p a p e r , I • was a*5v : e p . 1:. l a t ^ -July t h a t Ottawa C i t y had f l o a t e d p r i v a t e l y I n cne VCS0 ir.ark.-t ^ ^ ~--<r v" $13<>8 mil l i e n at, f i e l d s of U-3/U p e r l e n t f o r t h e f i r s : 3,0 yvar5 a m 5 - - , ' 4 pe - c e n t f c r t h e r e m a i n i n g t e r m . According tc- A0 Eu A me a & C a r a d i a n '^'."pcr a-:e and m u n i c i p a l b c r a s s o l d on t h e U0S0 market amount.ed t o $100 m i l l i e r „ May and $3" ° '• rrd.llicn i n J u l y , NOT FOR PUBLICATION (Can.# m i l l i o n s ) Total Provincial* Direct and Guaranteed Municipal Corporation i960 I II mu.i 93.9 37.0 uo- . 82.1 26.6 25.0 1961 I II. 11.0 106.U 26 1962 ~ II Monthly: April May June July • 3.0 101.2 lo£ 100.0 —— 1.5 — lo 25 o 3 11,0 80.0 3.0 100.0 100.0 — 13.8 Sources 37.6 A, E0 Ames & Co„, Weekly Bond Sales Summary. 23~8 Bank loans and bank l i q u i d i t y . The rapid expansion of bank loans continued through the f i r s t half of July. During the f i r s t two weeks of the month, general loans of Canadian chartered banks increased by $166 million„ For the seven-week prior to July 11, the increase i n general loans by chartered banks amounted t o $£10 million* Between July 11 and July 2%, however 9 these loans contracted by $36 m i l l i o n . The expansion i n general bank loans has taken place a t a time when the Bank of Canada has been keeping an extremely t i g h t hold on bank reserves„ The degree of austerity exercised during the period can be c l e a r l y seen by the following data on cash reserves and l i q u i d a s s e t s of chartered banks. A f t e r a s l i g h t increase due to advances from the Bank of Canada received one week and repaid the next, cash reserves of chartered banks were lower by $5>0 m i l l i o n on August 1 than the average f o r the week ending the proceeding June 27—the week during which the emergency a u s t e r i t y program was begun. NOT FOR PUBLICATION NOT FOR PUBLICATION In these circumstances 5 the chartered banks financed'the expansion i n loans by massive s a l e s of,Treasury bonds and b i l l s . Since June 6^ the chartered banks have sold $608 m i l l i o n of t h e i r holdings of Government bonds — about 22 per cent of t h e i r t o t a l holdings of "such s e c u r i t i e s on June C , Since June 20, net s a l e s of Government bonds by the chartered banks have amounted to $Ulii m i l l i o n (see Table). - C a n a d i a n Chartered Banks: Cash Reserves & Other Assets (In m i l l i o n s of d o l l a r s or per cent) Cash Ratio Cash Reserves Liquid Liquid Asset Assets. Ratio General Loans a / . Treasury Bills a/ 5,905 6,033 6,261 6,519" 6,6U9 1,181 1,075 l,oU8 1,009 -908 6,350 6,a32 6,^19 6,623. 6,685 6,662 6,6)19 1,023 1,009 1,010 995 917 908 Canadian Government Bonds a / Average for months March April. May June July 1,101 1,113 * 8.1 8.1 8.1 - 8.18 8.20 l,llh ' 1,165 1,159 Average f o r week, endings June -13 20 27 July U : : 11 ". V 18 / 25 a s " of £ -Aug. 1. . ' 2,L5l 18.0k 2 , 3 5 1 17.12 2,358 17,13 2/286 16.05 2,195 15.S3 - 2,708 2,679 2,719 -2,1,57 2,212 : •> 1.150 1,17.0 1,196. 1.135 1L3 1,117 1,185 ljlU6 . 8,1 *2,313 8.2 2 . . 268 2.265 8.U 2,2188.03 . .2,226 8.09 8,il 2,179 2,181 8.39 9,09 16.2 15 - 9 15.9 45.69 15.75 15.ui: 15. 4J 2,187" r 1 5 - 4 4 ' -n.a„ . 972 2,6U6 2,521 2,2*57 2,1,37 2,3U7 2,280 2,212' 2,107 a/ Weekly data are - f o r the l a s t Wednesday of the month <, Weekly f i g u r e s are ' x holdings as of date i n d i c a t e d . ;• Sources Bank of Canada„ Weekly Financial S t a t i s t i c s and S t a t i s t i c a l Summary9 June, 1962 Sales of Treasury b i l l s have reduced the l i q u i d - a s s e t r a t i o o f the chartered brnks 1: vt y ; - • :-he agreed-upon minimum of 15 ner cento The cash reserve r a t i o of. these ban>o has held very near the 8 per cent l e g a l minimum. Perhaps i l l u s t r a t i v e of the tightness i n the l i q u i d i t y and reserve p o s i t i o n of the chartered banks as t h e . f a c t . t h a t the Bank of Canada c i n July5/"began to report these r a t i o s in terms of two decimal'places rather than one5 as they had formerly done = . . Because cf the ':gh^ness of credit- the chartered banks, on July 1, r a i s e d the i n t e r e s t rate on savings deposits from 2->3/U to 3 per centj and on July 3* they raised the prime lending rate from 5 - 1 / 2 to 6 per cent* the maximum NOT FOR PUBLICATION • - 7 ~ that banks can charge under the Bank Act. Most loans have been made at t h i s r a t e s though some have been reported at f r a c t i o n a l l y l e s s 0 The chartered banks liave a l s o announced t h e i r i n t e n t i o n to t r y t o do away •with overdrafts as a means of extending c r e d i t e The Canadian banks have several times i n the past t r i e d and f a i l e d to do away with the accepted use of overdrafts s -which f o r many years has been a part of Canadian banking. Under the present circumstances, however, the banks f e e l that conditions favor them, and hope to be able to r i d themselves of the system by the beginning of Septembero This change i s presumably an attempt on their part to bring under b e t t e r control t h e i r loan commitments to t h e i r customers,, Dual Bank r a t e . Since November 1, 195*6 the Bank of Canada has maintained a "floating" discount rate a t a l e v e l l A of 1 per cent above the proceeding week's average auction rate on 3-month Treasury b i l l s » As a part of the emergency program begun i n l a t e June, however, the Bank rate was divorced from the Treasury b i l l rate and f i x e d a t 6 per c e n t . The r e s u l t i s that Canada now has a dual Bank rate whenever the auction rate on 3-month Treasury b i l l s i s l e s s than 5 - 3 A per cento For, -while the o f f i c i a l rate i s now s e t at 6 per cent, money market dealers are s t i l l allowed t o borrow from the Bank of Canada (under purchase and r e s a l e agreements) a t l / U of 1 per cent above the Treasury b i l l auction r a t e , or at 6 per cent, whichever i s lower. Operations of Canadian banks i n non-Canadian c u r r e n c i e s . Following an increase of $02.5 m i l l i o n increase i n A p r i l , non-Canadian d o l l a r d e p o s i t s increased by $207*9 m i l l i o n i n May, and then f e l l $92«,3 m i l l i o n i n June, the l a t e s t period f o r which data are a v a i l a b l e , Call loans by Canadian banks i n the New York market declined sharply i n June and July, as shown by the f o l l o w i n g estimates ( i n U0S„ $ m i l l i o n s ) of the New York State Banking Department e I960 1961 UeS0 banks 1962 1.828 Foreign agencies Compare a / Canadian Other (residual) 829 20 809 50 81*8 111 727 2$ £Hl 69 n e a„ n0a0 a / Call l o a n s , as reported by Canadian banks, converted i n t o U0S» d o l l a r s at end-of-month exchange rates® Foreign exchange. The Canadian d o l l a r strengthened almost c o n t i n u a l l y through the l a s t week of June and throughout July. This strengthening began almost immediately a f t e r Prime Minister Diefenbaker's announcement on June 22 of impending emergency measures by the Government of Canada t o strengthen the d o l l a r . I t was reinforced when the a u s t e r i t y program was announced on June 2ho -NOT FOR PUBLICATION - 8 - NOT FOR PUBLICATION. (For d e t a i l s 5 s e e "Capital Market Developments" July 6 , 1962„) Combined with over $1 b i l l i o n i n e x t e r n a l h e l p aimed at- increasing Canada's a b i l i t y t o carry out i t s announced i n t e n t i o n s , these measures underscored the Government of Canada1s determination to defend the 92.5-UoS. cent rate f o r the Canadian d o l l a r e s t a b l i s h e d on May 2« The market rate on the Canadian d o l l a r had hovered a t or near i t s lower support price of ?lo75 cent= throughout the f i r s t three weeks of June, with Bank of Canada l o s i n g some S350-SUQO m i l l i o n i n defending t h i s lower l i m i t 0 S e l l i n g pressure on the Canadian d o l l a r eased, however, immediately i n the #ake of the announced s t a b i l i z a t i o n program, and the rate climbed t o s l i g h t l y above par by June 26«, with the. Bank of Canada picking up reserves during the last) week of Junee By the end of June, Canadian gold and f o r e i g n exchange reserves stood a t $l s 808o? m i l l i o n , as compared with &1,U92 m i l l i o n a t t h e end of May, and $ 1 . 1 b i l l i c n repeated by the Prime Minister on June 2i|. A f t e r allowing f o r the $6^0 m i l l i o n increase i n reserves due to external a s s i s t a n c e by the International. Monetary Fund, United Kingdom, and United S t a t e s Federal Reserve Banks (and subject t c a rounding e r r o r ) , net increases i n Canadiaiv.reserves dxje t o m r k e t t.rar.sactions appear to. have been around $£8 mp.lidn~for the l a s t week, in Jure. The increase i n Canadian reserves of $305.7 m i l l i o n f o r July includes an advance repayment from the Frensn received i n mid-month i n the amount of $ 6 l m i l l i o n . Nonetheless, the increase i n reserves gained from the market amounted t o $2UU m i l l i o n and the spet rate remained above par rate during the month of July. By August 6 , the d o l l a r remained strong "with ibe Bank of Canada continuing t o add to; reserves whiles %e rate at about 92.8 U.S. c e n t s . Recent changes i n Canadian reserve? (in. m i l l i o n s of U.S. d o l l a r s a t month-end) were s ' . * - . 1962 Feb. Mar. .May .jure 21+ June Gold IT. So d o l l a r s Total Change during period 962.a 78L.3 963.7 7L5.7. 963.2 .631.6 %7L6.7 15709o1i I,59U.8 -37.3 -Hl*o6 - 175-2 . 669.0 913.0 579.8 r 139o7 1 , 4 9 2 . 8 .1,100.0 =102,0 -392.8 n.a. n.a. 1,808,7 2,llUoU +708,7 +30<,7 Stock market. After rattier mixed movements during June and July, the Canadian stock market at the end cf July stood a t v i r t u a l l y the same l e v e l i t had a t the end of June. The New York Standard and Poors i n d u s t r i a l Index moved upward e a r l y i n the month and then declined again t o almost the same l e v e l at- the end of July as i t had been a t the end of June. NOT FOR PUBLICATION NOT FOR PUBLICATION Avg. f o r week ending DBS Industrials N.Y. Standard and Poor . Industrials 1962: June 1U 28 July 6 13 20 27 288.0 _285.5 58.6^ 55.85 282.2 287.5 279.3 285.6 58.93 60.12 59.L1 55.26 Europe and B r i t i s h Commonwealth Section, II. Chart Chart Chart Chart Chart Chart Chart Chart Nine Charts on Financial Markets Abroad 1 2 3 U5> 6 7 8 - I n t e r e s t Arbitrage, United States/Canada I n t e r e s t Arbitrage, New York/London I n t e r e s t Arbitrage f o r German Commercial Banks I n t e r e s t Arbitrage, Frankfurt/London Short-term I n t e r e s t Rates Long-term Bond Yields Industrial Stock Indices Spot Exchange Rates — Major Currencies Against U.S. Dollar Chart 9 - 3-month Forward Exchange Rates NOT FOR PUBLICATION - 10 ° Canada; T r e a s u r y b i l l Y i e l d s and Exchange R a t e s 3-mO: Treaso b i l l a r b i t r a g e c a l c u l a t i o n In favor 3-mo Can. Canada J,5. D i f f e r - C a n ,$ bilic/ b/ ence j/_ £/ 1962-Hlga Low 1962-June 7 Ik 21 28 5 12 19 26 Aug. 2 July 5.51 3.01 2.98 2,6L 2.59 0.22 0.13 -2.31 3.62 3.93 a.92 2.6L 2.73 2.72 2.36 2.92 2.98 2.93 2.89 2.83 0.98 1.20 2.20 2,59 2.51 2.50 2.58 2.58 2.56 -0.55 -1.02 -2.31 -1.75 -1.96 -2.02 -2.02 -2,16 -1,88 ' 5.L3 5 °Ud 5.51 5.L7 5.39 0.8L -0.11 0.L3 0.18 -0.11 - +0.8U +0.55 +0.L8 +0.56 +0.L2 +0.68 Spot C an. (U.S. cents) F i n a n c e paper<V 90-179 30-89 days days 95.75 91.73^ 91.73 91.75 91.75 92.50 92.66 92.70 92.72 92.75 92.75 — — 3-3/8-1/2 3-1/2-3/L k 5-1/2 5-1A-1/2 S-3/U 5-1/2-3/it 3-5/8-3/u — . — g / Thursday q u o t a t i o n s , " ^ ^ b, Spread between spot and 3-month f o r w a r d r a t e i n p e r c e n t p e r annum. D i s c o u n t equals ( - ) 9 c / Net of d i f f e r e n c e i n b i l l y i e l d l e s s d i s c o u n t on 3-month Canadian d o l l a r , d/ Friday quotations. S e l e c t e d Government of Canada S e c u r i t y Y i e l d s 6-mo. T r e a s 0 b i l l s Spread Canada over U .S.b/ V 1962 - H i g h ' 6 13 20 27 July 5 5,74 3.18 June 12 19 Aug. 26 1 - 3.83 1 = 12 5.16 5.73 5.715.72 5.7L 5.65 5.62 . Intermediate bonds (8 y r „ ) Spread Canada over U .S.d/ £/ Long-term bonds (20 y e a r ) (35 y e a r ) Spread Spread Canada over over Canada U.s.f/ g/ u,s.^/ e/ :,S4 0.19 5,20 a.oa 1,29 C.03 5.L8 a.73 1 .US 1,10 1.33 -2,37 2.8L 2,69 2.63 2.59 2.51 2.53 lol 4,39 0.6U 0.72 1.03 1.28 1.29 1.25 1.16 1.13 L.95 a.98 5.05 5.26 5.37 5.L2 5.L8 5.W 5.L8 1.10 l.lit hoik 5,11 5.20 5,13 S.11 5.07 5.03 1.11 0.73 1.17 1.3U 1.39 1.39 l.tiU 1.U5 l.itli 5.19 L.81 1.10 0.82 L.9L li.97 5.0L 5.13 5.15 5.15 5.15 5.19 5.19 0.98 1.02 1.06 1.10 '• a/' Average y i e l d a t weekly t e n d e r on Thursday, b / S p r e a d between Canadian a u c t i o n r o t e and composite market y i e l d of U, S . b i l l on c l o s e of b u s i n e s s Thursday, c j Government of Canada 2-3/U p e r c e n t of June 1967-68. d / Snread over U. S. Government 2 - 1 / 2 - p e r c e n t of 1963-68— e / Government of Canada 3 - l / h p e r c e n t of October 1979. . £ / Spread-'over J , S. Government 3 - 1 / ' p e r c e n t of 1978-83, / Government Digitized gfor FRASER of Canada 3-3/li per c e n t of September 1996 --March 1998. h / Spread over S- Government- of 1995 = 1.05 1.05 1.03 1.08 1.06 INTEREST ARBITRAGE, UNITED STATES/ CANADA Thursday figures THREE-MONTH TREASURY BILL RATES .'V RATE DIFFERENTIAL A N D FORWARD CANADIAN DOLLAR EXCHANGE COVER S P R E A D IN F A V O R O f C A N A D A + A/ f.S. \/v! RATE DIFFERENTIAL WITH FORWARD NET I N C E N T I V E IN F A V O R OF C A N A D A + 1959 1960 1961 1962 INTEREST ARBITRAGE, 3-MONTH TREASURY NEW BILL Y O R K / L O N D O N RATES \ EURO DOllAR RATE-LONDON ij_L RATE — DIFFERENTIAL 3-MONTH FORWARD AND | STERLING SPREAD — |Y"V FORWARD RATE i RATE DIFFERENTIAL "FORWARD WITH EXCHANGE COVER! I IN F A V O R OF L O N D O N INTEREST ARBITRAGE FOR GERMAN COMMERCIAL BANKS Friday figure! . 3-MONTH - EURO-DOLLAR RATE RATE Pi TREASURY BILLS, DEPOSIT DIFFERENTIAL DIFFERENTIAL FORWARD WITH FORWARD IN F A V O R LOAN 1960 LENDING RATE AND RATES AND NET I N C E N T I V E : INTERBANK INTERBANK DEUTSCHE EXCHANGE MARK COVER OF FRANKFURT ( + ) RATE 1961 1962 \V\ INTEREST ~3-MONTH ARBITRAGE, TREASURY INTERBANK FRANKFURT/ BILLS LENDING AND I O NDt) N 1 RATES ~i UNITED KINGDOM V A GERMAN INTERBANM RATE D I F F E R E N T I A L A N D | - 3 - M O N T H FORWARD STERLING GTRMAN INTERBANK RATE DIFFERENTIAL WITH FORWARD NET INCENTIVE OF UNITED KINGDOM OVER: EXCHANGE I /N \/ ,\r COVER j 1961 SHORT-TERM 1958 # INTEREST RATES 19 59 * 1960 196V 3 month treosury bill rotei for oil countnei except Jopon (3 month mterbonk deponi role) and Switzerland (3 month deposit role) 3 month rate for U 5 dollar depouli m London 1962 LONG-TERM BOND YIELDS |A| V " l ^ T O ^ v y ; \ZVx 4 A J - ' l l I M I I i i i i 11 11 i 11 1 1 1 1 1 1 1 1 1 1 1 1960 1959 \ U.S. II i I I i I M I i 1 1 1 1 1 1 1 u i x u n INDUSTRIAL STOCK * INDICES* 1 9 5 8 = 100 " Ratio scale 450 * Note- Japan* Index of all tlocki iraded on Tokyo exchange MAJOR CURRENCIES AGAINST U.S. DOLLAR Abo we p a r A b o we p a r 1962 4 3-MONTH FORWARD EXCHANGE RATES Per ! AGAINST U. S. DOLLARS PREMIUM + ; j_AGAINST POUND I STERLING - PREMIUM*; AGAINST POUND LONDON GERMAN STERLING MARK - LONDON v-f I BELGIAN ; 1961 FRANC cent per annum
@FedFRASER