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BOARD O F G O V E R N O R S
DIVISION O F I N T E R N A T I O N A L F I N A N C E
V
F E D E R A L RESERVE SYSTEM
December l L , 1962
H. 13
No. 89
CAPITAL MARKET DEVELOPMENTS ABROAD
Io Canada
I I o Nine Charts on F i n a n c i a l Markets Abroad
±o Canadas
Money and C a p i t a l Markets i n November
The Bank of Canada, i n r e d u c i n g the d i s c o u n t r a t e t o U p e r c e n t
on November 13, served n o t i c e of a r e o r i e n t a t i o n of Canadian monetary p o l i c y
by observing t h a t i n view of the i n f l o w of f o r e i g n c a p i t a l and the i n c r e a s e
i n r e s e r v e s " g r e a t e r weight could be given t o o t h e r f a c t o r s . "
Money r a t e s r e a c t e d q u i c k l y t o the Bank r a t e a c t i o n , w i t h t h e 91day T r e a s u r y b i l l y i e l d f a l l i n g t o 3,62 p e r c e n t on November 15 from U.09 per
c e n t the p r e v i o u s week. On December 5 , t h e 3-month b i l l r a t e stood a t 3 . 7 1
p e r cent» The y i e l d on 6-month Treasury b i l l s " u n d e r w e n t s i m i l a r movements,
f a l l i n g to 3°lk p e r c e n t on November 15 from k»21 p e r c e n t on November 7$ and
p a r t i a l l y r e c o v e r i n g t o 3°9U p e r c e n t on December 5«
Bond y i e l d s a l s o f e l l f o l l o w i n g t h e Bank r a t e announcement, p a r t i c u l a r l y
a t t h e s h o r t end of the y i e l d curve 0 I n the week ending November 111, d e c l i n e s
i n Government bond y i e l d s ranged from 53 b a s i s p o i n t s on s h o r t - t e r m ( 1 - 1 / 2 y e a r )
i s s u e s t o a b o u t 10 b a s i s p o i n t s on l o n g - t e r m (35 y e a r ) bonds e By December 5?
bond y i e l d s had r e c o v e r e d most of the mid-month d e c l i n e p r i m a r i l y because of
heavy bond s a l e s from the nonbank s e c t o r t o f i n a n c e purchases of Canada Savings
Bonds ( s e e Table l ) „
Table 1*
Canada: Net Purchases(+) or S a l e s ( - ) of Government
S e c u r i t i e s , October 2lT ° December 5 S 1962
Government of Canada S e c u r i t i e s
Canada Savings Bonds
Bonds
Treasury B i l l s
Bank of Canada
Chartered Banks
Government Accounts
General Public
Change i n T o t a l
Outstanding
+ 5u
. +111
+ 17
- 52
a / +255
+216
+ 2
b / -603
+820
+130
-131
+820
a / I n c r e a s e d by $270 m i l l i o n i n consequence of t h e t e r m i n a t i o n of p o r t i o n s
of the Bank5 s r e c i p r o c a l c u r r e n c y arrangement with t h e F e d e r a l Reserve
System and t h e Bank of England amounting t o $189 m i l l i o n ( e q u i v a l e n t t o
U.S„ $175 m i l l i o n ) on October 31 and $ 8 l m i l l i o n ( e q u i v a l e n t t o U.S.
$75 m i l l i o n ) on November 30o
b / Decreased by t h e t r a n s a c t i o n s d e s c r i b e d i n a / above»
OFFICIAL USE ONLY
DECONTROLLED AFTER SIX MONTHS
r
OFFICIAL USE ONLY
- 2 -
In the exchange market, the Canadian d o l l a r has remained s t r o n g
f o l l o w i n g a temporary weakening immediately i n the wake of the r a t e announcement,
Bat the Bank of Canada acquired r e s e r v e s a t a r a t e s u b s t a n t i a l l y below t h a t
of r e c e n t months» As compared w i t h a c c r u a l s of U»S0 $llU m i l l i o n i n September
and U.S. $189 m i l l i o n ( a d j u s t e d ) i n October, the ( a d j u s t e d ) i n c r e a s e i n
o f f i c i a l gold and U„So d o l l a r holdings d u r i n g November was only U 0 S 0 $69 million«,
On November lU 5 t h e Canadian Government announced t h e e l i m i n a t i o n
( o r , i n a few c a s e s , r e d u c t i o n ) of the temporary surcharges on imports
amounting t o about $260 m i l l i o n a n n u a l l y 0 The surcharge removals, a f f e c t i n g
p r i n c i p a l l y f o o d , f i s h , and a g r i c u l t u r a l p r o d u c t s , were a p p a r e n t l y motivated
by a d e s i r e t o moderate upward p r e s s u r e s on consumer p r i c e s , which have been
r i s i n g i n r e c e n t months e These s u r c h a r g e s , l i k e those e l i m i n a t e d on October 17,
covered about o n e - t w e l f t h of the t o t a l import t r a d e a f f e c t e d by t h e i m p o s i t i o n
of temporary surcharges i n l a t e June* Thus, about f i v e - s i x t h s of t h o s e imposed
remained i n e f f e c t .
Reduction i n d i s c o u n t r a t e * On November 13, the Bank of Canada
reduced i t s minimum r a t e on advances t o c h a r t e r e d banks from $ to U p e r c e n t .
This a c t i o n followed c u t s i n the d i s c o u n t r a t e of l / k of 1 p e r c e n t each on
September 7 and October 12o In announcing t h e a c t i o n , Governor Rasminsky c i t e d
the reappearance of an a p p r e c i a b l e flow of long-term c a p i t a l i n t o Canada and
t h e s t r e n g t h e n i n g of exchange r e s e r v e s and s t a t e d t h a t , i n view of t h e s e
developments, " g r e a t e r weight could i n the p r e s e n t circumstances be given t o
other f a c t o r s
The e x t e n t of t h e c u t i n the d i s c o u n t r a t e and Governor Rasminsky's
accompanying statement c o n s t i t u t e c l e a r evidence t h a t , i n t h i s a c t i o n s the
Bank of Canada has s h i f t e d the f o c u s of Canadian monetary p o l i c y <, E a r l i e r i n
1962, b e f o r e the June c r i s i s , t h e r a t e " f l o a t e d " a t 0<>25 per c e n t above the
weekly a u c t i o n y i e l d on 91-day Treasury b i l l s » In the two r e c e n t r a t e d i s c o ant
r e d u c t i o n s , the r a t e was f i x e d a t a range l A t o 1/2 of 1 p e r c e n t above t h e
proceeding week's a u c t i o n r a t e f o r Treasury b i l l s (see Table 2).„ With the
most r e c e n t c u t i n the d i s c o u n t r a t e , the Bank went f u r t h e r than would have
been r e q u i r e d i n a t e c h n i c a l a d j u s t m e n t t o the f a l l i n Canadian s h o r t - t e r m
money r a t e s 0 Thus, t h e U p e r cent Bank r a t e on November 13 was s l i g h t l y below
the U<>09 p e r c e n t y i e l d a t t h e Treasury b i l l a u c t i o n on November 8„
Table 2 ,
Canadas Bank of Canada Discount Rate and Treasury
B i l l Y i e l d s 9 S e l e c t e d D a t e s s 196"2
'
( i n per. cent per annum)
Treasury b i l l
Date
Bank r a t e
y i e l d &/
1962;
~~
June
2I4.
60OO
Uo92
September 7
5>o5>0
£<>07
October
12
5<>00
U»72
November 13
UoOO
U»09
a / 91-day Treasury b i l l y i e l d a t weekly a u c t i o n on the
Thursday preceeding Bank r a t e a c t i o n on d a t e shown0
OFFICIAL USE ONLY
OFFICIAL IBB ONLY
- 3 -
1
Secondly, Governor Rasminsky s s t a t e m e n t t h a t the a c t i o n could be
taken as a move toward e a s i e r c r e d i t c o n d i t i o n s was i n sharp c o n t r a s t t o h i s
s t a t e m e n t s accompanying the e a r l i e r d i s c o u n t r a t e a c t s , which cautioned t h a t
r e d u c t i o n s were n o t t o be understood as a move away from a u s t e r i t y .
Money m a r k e t . A f t e r e x p e r i e n c i n g s u b s t a n t i a l d e c l i n e s during
October, Canadian s h o r t - t e r m i n t e r e s t r a t e s dropped a b r u p t l y , f o l l o w i n g t h e
announcement of the c u t i n t h e d i s c o u n t r a t e on November 13 e The a u c t i o n
y i e l d on the 91-day T r e a s u r y b i l l on November 15 was 3.62 p e r cent—U7 b a s i s
p o i n t s lower than t h e y i e l d a t the preceeding weeks's a u c t i o n . The Treasury
b i l l y i e l d recovered t o 3.82 p e r c e n t during t h e f o l l o w i n g week, and s e t t l e d
a t 3»71 p e r c e n t on November 29, where i t remained on December 6 (see Tables 10
and 11 and Chart 5)•
The spread of the Canadian b i l l r a t e over the U.S. Treasury b i l l
narrowed s h a r p l y with the d e c l i n e i n Canadian y i e l d s . The covered i n c e n t i v e
i n f a v o r of t h e Canadian b i l l ( a f t e r allowing f o r t h e c o s t of forward exchange
cover) a l s o d e c l i n e d w i t h Canadian b i l l r a t e s , b u t the d e c l i n e was p a r t i a l l y
o f f s e t l a t e r i n t h e month by a narrowed d i s c o u n t on the forward Canadian d o l l a r ,
(see Table 10 and Chart l ) .
Canadian f i n a n c e paper r a t e s followed a p a t t e r n s i m i l a r t o t h a t of
the Canadian Treasury b i l l . Accordingly, t h e spread between U.S. and Canadian
f i n a n c e paper y i e l d s narrowed s h a r p l y i n mid-November; the covered i n c e n t i v e
i n f a v o r of Canadian f i n a n c e paper f e l l from 0.U9 p e r c e n t on November 9 t o
0.19 p e r c e n t November 16, b u t had once a g a i n i n c r e a s e d t o 0 . 5 1 per c e n t by
November 23 as Canadian r a t e s underwent a - p a r t i a l r e c o v e r y and the c o s t of
forward exchange cover f e l l l a t e i n t h e month (see Table 3)«
U.S. and Canadian Finance Paper Rates
and A r b i t r a g e C a l c u l a t i o n
( i n p e r cent p e r annum)
90-day
Forward
Canada
Spread
u. s .
Exchange
Table 3 .
August
2k
September 7
October
5
19
26
November
2
9
16
23
5.00
5.00
5.00
U.75
U.25
L.25
U.25
3.75
U.oo
2.88-3.13
2.75-3.00
2.50-3.00
2.75-2.88
2.63-2.88
2.25-2.88
2.50-3.00
2.50-3.00
2.50-3.00
2.00
2.12
2.25
1.93
1.U9
1.69
1,50
1.00
1.25
OFFICIAL USB ONLY
,
-2.02
-1.69
-1.68
-1.28
-1.1U
-1.1k
-1.01
—0o.8l
-0.7U
Net
Incentii
-0.02
+0.U3
. +0.57
+0.6S
+
O<,35
+0.^5
+o.it9
+0.19
+0o51
OFFICIAL USE ONLY
Bond market a S h o r t - and i n t e r m e d i a t e - t e r m Canadian T r e a s u r y bond
y i e l d s s h a r e d i n t h e d e c l i n e i n Canadian i n t e r e s t r a t e s f o l l o w i n g t h e c u t i n
t h e d i s c o u n t r a t e * A l a r g e p a r t of t h i s mid-month d e c l i n e i n bond . y i e l d s was
r e c o v e r e d i n s u b s e q u e n t t r a d i n g , and by December 5> y i e l d s on s h o r t - and
i n t e r m e d i a t e - t e r m T r e a s u r y s e c u r i t i e s had r e t u r n e d t o w i t h i n about 10 b a s i s
p o i n t s of the l e v e l s t h e y had occupied p r i o r t o t h e d i s c o u n t r a t e a d j u s t m e n t o
Y i e l d s on l o n g - t e r m T r e a s u r y s e c u r i t i e s remained v e r y n e a r l y c o n s t a n t t h r o u g h o u t
November a t o r n e a r t h e h i g h l e v e l a t t a i n e d i n J u l y ( s e e Table U)<,
Table U„
Market Y i e l d s on Canadian T r e a s u r y S e c u r i t i e s
3 months
Treasury b i l l
(Thursday a u c t i o n )
April
12
3.0k
July
18
5.51
August
15.
5.05
September 26
Iu99
October . 2k
lw27
November
7
Uo09
1U
3.62
21
3.82
28
3-71
December
5
3-71
196k
3.58
5=76
5-62
5.26
U.lil
U.33
1965
3.93
5.58
5.57
5.22
U.U8
U.ltO
3.80
3.98
U.llt
3.98
U.23
U.20
It.lit
U.30
Bonds
1967-68
u.13
5.11
5.01
5.08
u.69
U.53
U.27
U.U2
U.38
U.U3
1975-78
L.80
5.U2
5.1*0
5.38
5.17
5.11
li.9U
5.07
5.06
5.06
1996-98
L .88
5.15
5.17
5.19
5.17
5.12
5.03
5.06
5.07
5.09
An i m p o r t a n t f a c t o r i n m a i n t a i n i n g market y i e l d s on T r e a s u r y s e c u r i t i e s has been t h e l a r g e s e a s o n a l f l o w of f u n d s w i t h i n t h e nonbank s e c t o r from v
^ m a r k e t a b l e i s s u e s i n t o Canada Savings Bonds„ Always l a r g e d u r i n g t h e l a t e
f a l l , r e c o r d s a l e s of Savings Bonds were made d u r i n g r e c e n t weeks i n r e s p o n s e
" t o t h e f a v o r a b l e terms of i s s u e of t h e p r e s e n t s e r i e s « Non-marketable but
" always redeemable a t p a r , Canada Savings Bonds p r e s e n t l y o f f e r an i n i t i a l
i n t e r e s t y i e l d of U„50 p e r c e n t and a y i e l d of 5<>11 p e r c e n t i f h e l d l h y e a r s
to maturity.
Debt management program,, On November 30, t h e M i n i s t e r of F i n a n c e
o u t l i n e d t h e Government's p l a n s f o r r e f i n a n c i n t t h r e e T r e a s u r y bond issuese,
t o t a l l i n g $615 m i l l i o n , m a t u r i n g between December 1 and J a n u a r y 1„ The
. m a t u r i n g i s s u e s w i l l be r e f i n a n c e d by $100 m i l l i o n i n new T r e a s u r y b i l l s and
a new o f f e r i n g of $500 m i l l i o n i n Government of Canada s e c u r i t i e s 0
The new i s s u e of $500 m i l l i o n w i l l be o f f e r e d i n t h e two f o l l o w i n g
maturities:
(1) 3 - 1 / 2 p e r c e n t n o n - c a l l a b l e bonds due F e b r u a r y l s
1965* p r i c e d t o y i e l d a b o u t Uol2 p e r c e n t t o m a t u r i t y , ,
( 2 ) U-l/U p e r c e n t n o n - c a l l a b l e bonds due J a n u a r y 1 5 ,
1968, p r i c e d t o y i e l d a b o u t Uol|2 p e r c e n t t o m a t u r i t y .
I n exchange f o r 3 - 1 / 2 p e r c e n t T r e a s u r y bonds due December l 5 s
t h e Bank of Canada h a s a g r e e d t o a c q u i r e $200 m i l l i o n of t h e new i s s u e s open
a s t o m a t u r i t y ; the r e m a i n i n g $300 m i l l i o n , a l s o open a s t o m a t u r i t y , w i l l be
o f f e r e d f o r c a s h . P r o c e e d s of the c a s h o f f e r i n g w i l l be used t o r e t i r e T r e a s u r y
s e c u r i t i e s m a t u r i n g December 15 and J a n u a r y 1„
OFFICIAL USE ONLY
OFFICIAL USE ONLY
- 5 -
Borrowings i n t h e United States<> Canadian l o n g - t e r m bond y i e l d s
have remained s u f f i c i e n t l y h i g h t o p r o v i d e c o n t i n u e d a c t i v e i n t e r e s t i n t h e
U.S. a s a s o u r c e of l o w e r - c o s t f i n a n c i n g . According t o A. B. Ames & C o . ,
s a l e s of new Canadian s e c u r i t i e s i n t h e United S t a t e s t o t a l e d Can. $677 m i l l i o n
through November 26, a s compared w i t h Can. $238 m i l l i o n and Can. $li;8 m i l l i o n
i n comparable p e r i o d s of I960 and 1961 (see Table 5 ) •
S t a t i s t i c s on t r a d e i n o u t s t a n d i n g s e c u r i t i e s between Canadians
and f o r e i g n e r s r e v e a l n e t s a l e s by Canadians of $15 m i l l i o n i n August ( i n c l u d i n g
$12 m i l l i o n of Canadian s e c u r i t i e s ) \ t h i s was t h e f i r s t i n s t a n c e of n e t s a l e s
s i n c e January of t h i s y e a r , and c o n t r a s t e d with n e t p u r c h a s e s of $19 m i l l i o n
i n J u l y . I n September, n e t s a l e s of o u t s t a n d i n g s e c u r i t i e s t o f o r e i g n e r s
amounted t o $9 m i l l i o n . For t h e t h i r d q u a r t e r , t r a n s a c t i o n s i n new a s w e l l
a s i n o u t s t a n d i n g s e c u r i t i e s between Canada and o t h e r c o u n t r i e s gave r i s e t o
a n e t c a p i t a l i n f l o w of $38 m i l l i o n . Outflows were r e c o r d e d f o r each of t h e
p r e v i o u s q u a r t e r s of 1962.
Table 5»
S a l e s of New Canadian S e c u r i t i e s Payable i n U.S. Funds
(Can. $ m i l l i o n s )
Total
i960
T o t a l t o Nov. 28
I
II
III
1961
T o t a l t o Nov. 27
I
II
III
1962
T o t a l t o Nov. 26
I
II
III
Monthly:
April
May
June
July
August
September
October
November ( t o 2 6 t h )
Source:
Government
__
Provincial,
D i r e c t and
Guaranteed
238.2
lWi.l
93.9
- «2
—
77.0
37.0
Uo
—
——
lk8.li
11.0
* *
—
*•«—
MM
250.0
1.5
100.0
—
250.0
102.0
——
122.0
11.0
80.0
26.U
8.0
—
1.5
2U.6
——
——
- '
——
8.0
15.0
79.0
OFFICIAL USE ONLY
-2Uo0
296.5
3.0
100.0 '
2U.8
—«=• •
100.0
——
13.8
——
250.0
——
1.5
——
——
28.7
—
A, E . Ames & C o . , Weekly Bond S a l e s Summary.
26.U
—
——
——
37.6
9.8
259.9
52.5
212.9
50.3
25.O
25.3
—
677.2
3.0
101.5
307.3
Corpora, tion
110,9
82.1
28.6
.2
—,-e
106.u
2iw0
Municipal
8.9
23.8
1.0
1.9
1.8
.8
35.7
133.0
OFFICIAL USE ONLY
Bank l o a n s and bank l i q u i d i t y . General loans of the c h a r t e r e d banks
continued a s e a s o n a l d e c l i n e during November. As loans d e c l i n e d , the c h a r t e r e d
banks added t o t h e i r holdings of Treasury b i l l s and Canadian Government bonds 0
Cash r e s e r v e s were reduced t o j u s t under tiie 8 p e r c e n t l e g a l minimum i n the
week ending December 5 , b u t as a r e s u l t of continued Treasury b i l l purchases
the l i q u i d a s s e t r a t i o of the banks, a t 18.25 per c e n t , remained w e l l above
the 15 p e r c e n t agreed minimum-(see Table 6 ) ,
Table 6 .
Canadian Chartered Banks: Cash Reserves & Other Assets
( I n m i l l i o n s of d o l l a r s or p e r c e n t )
"
Cash
Reserves
Liquid
Asset
Ratio
General , Treasury
Loans —/ B i l l s —/
Canadian Government Bonds jy
(par v a l u e )
Cash
Ratio
Liquid
Assets
Average
of Wednesdays s
April
1,113
May
1,11k
June
1,165
July
1,159
August
1,151
September
1,113
October
1,106
8,1
8.1
8.18
8.20
8.12
8.1b
8.18
2,351
2,358
2,286
2,195
2,201*
2,205.
2,370
17.12
17.13
16.05
15.53
15.56
16.12
17.53
6,033
6,261
6,519
6,61*9
6,709
6,718
6,61*9
1,075
1,01*8
1,009
908
987
989
1,119
2,679
2,719
2,1*57
2,212
1,932
1,892
1,893
Average f o r
week ending:
October 10
1,100
8.11*
2,309
17.07
6,701*
1,066
1,887
November
7
Hi
21
28
i,il*l*
1,101*
1,102
1,105
8.37
8.07
8.06
8.08
2,513
2,1*65
2,1*83
2,502
18.38
18.03
18.16
18.30
6,606
6,571
6,51*1*
6,528
1,163
1,159
1,179
1,18U
1,9L5
1,997
2,0Wt
2,06U
December
5
1,106
7.99
2,522
18.25
n.a.
1,21U
2^09)i
a / Monthly d a t a a r e f o r t h e l a s t Wednesday of the month»
h o l d i n g s as of d a t e i n d i c a t e d .
Weekly f i g u r e s a r e
Source i Bank of Canada, Weekly F i n a n c i a l S t a t i s t i c s and S t a t i s t i c a l Summary«, June 1962.
„y.
Foreign exchange,, O f f i c i a l r e s e r v e f i g u r e s f o r the end of November*
down U0Se $6 m i l l i o n from the end of October, confirmed a slowdown i n o f f i c i a l
Canadian r e s e r v e a c c r u a l s . During November, t h e remaining r e c i p r o c a l currency
arrangements with the F e d e r a l Reserve System and the Bank of England were
reduced by U.S. $50 m i l l i o n and U.S. $25 m i l l i o n , r e s p e c t i v e l y . I f t h e s e
s p e c i a l t r a n s a c t i o n s had n o t taken p l a c e , o f f i c i a l r e s e r v e a c c r u a l s d u r i n g
November would have been U.S. $69 m i l l i o n , as compared with a c c r u a l s of U.S.
$llU m i l l i o n i n September and U.S. $189 m i l l i o n ( a d j u s t e d ) i n October (see Table 7)»
OFFICIAL USE ONLY
OFFICIAL USB ONLY
. - 7 -
The e a r l i e r rapid pace of r e s e r v e accruals by the Bank of Canada
slowed i n e a r l y November; on November 9 s the market r a t e on the Canadian
d o l l a r dropped s l i g h t l y and induced the Bank of Canada t o s e l l U.S. d o l l a r s
t o the market, A t u r n i n g p o i n t apparently came with the Bank of Canada d i s c o u n t
r a t e announcement. Immediately following t h a t announcement, on November ll±s
the market r a t e on the Canadian d o l l a r dropped s h a r p l y enough t o induce subs t a n t i a l support s a l e s by the Bank of Canada f o r the f i r s t time since the
end of June, This weakness i n the Canadian d o l l a r was s h o r t l i v e d , however s
and since mid-November the r a t e has edged h i g h e r , but with the Bank of Canada
g e n e r a l l y out of the market.
Table 7o
Canada: O f f i c i a l Holdings of Gold and U.S. D o l l a r s
Gold
March
May
June 2k
June
July
August
September
October
November
963.7
913.0
n,a.
669.0
673.8
683.0
688.6
n»a.
n.a.
U.S. d o l l a r s
Total
Change during period
7U5.7
579.8
n.a.
1,139.7
1.UU0.6
1.6U7.6
1,756.0
n.a.
n.a.
1,709.1
1,U92.8
1,100.0
1,808.7
2,llli.lt
2,330.6
2,UiU.6
2,613.9
2,607.5
- 37.3
-102.0
-392.8
+708.7
+305.7
+216.2
+111.0
+169.3
- 6.U
Canadian banks operations i n U.S » d o l l a r s . Non-Canadian currency
d e p o s i t s i n Canadian banks increased Can,
i n c r e a s e s of Can. $8 m i l l i o n i n September and Can. $126 m i l l i o n i n August. A
l a r g e p a r t of t h e October i n c r e a s e was probably due t o "window dressing"
operations of Canadian banks.
.
Table 8»
Date
C a l l Loans i n the New York Market, end of Month
($ m i l l i o n s )
Foreign Agencies
U0S e i
Banks"
Total a /
Canadian b /
1960-December
196l-December
1962: April
May
June
July
August
September
October
a/
b/
c/
r/
1,1*96
1,963
1,828
l,li30
1,361
1,0L2
l,lltl
2,020 r /
2,086
8h9
859
959
752
610
U87
778
750 r /
8L6 ~
.829
809
818
727
Shi
U73
73U
708
782
Other c7
20
50
111
25
69
1U
hk
U2 r /
6U -
Estimates by New York S t a t e Banking Department.
C a l l Loans, as reported by Canadian banks, converted i n t o U0S0
d o l l a r s a t end-of-month exchange r a t e s .
Residual,
Revised.
OFFICIAL USE ONLY
OFFICIAL USE ONLY
-
8 —
Stock m a r k e t . The Canadian D.B.S. i n d u s t r i a l s index recovered
q u i c k l y f o l l o w i n g a l a t e - O c t o b e r drop i n r e a c t i o n t o t h e Cuban c r i s i s o With
stock purchasing s p u r r e d somewhat by t h e p r o s p e c t of e a s i e r c r e d i t f o l l o w i n g
t h e Bank r a t e c u t i n mid-November, t h e index advanced s t r o n g l y throughout t h e
month-(see Table 9 and Chart 7)«
Table 9.
Average f o r week ending
Canadian and U.S. I n d u s t r i a l Stock P r i c e s
DBS I n d u s t r i a l s a /
N.Y. Standard and Poor
Industrials
1962:
July
19
112.3
59.Ill
August
16
123.2
61.23
September
6
27
120.3
113.9
61.03
58.87
October
18
11U.1
59.10
November
1
8
15
22
29
115.5
118.6
122.3
12U.0
125.5
59.36
61.31
62.93
63.55
61.97
£7 This s e r i e s i s t h e r e c e n t l y - p u b l i s h e d DBS index of 76 i n d u s t r i a l s (195610U), and r e p l a c e s t h e o l d e r DBS index of 66 i n d u s t r i a l s (1935-1939=100) p r e v i o u s l y r e p o r t e d i n C a p i t a l Markets Developments Abroad s e r i e s f o r Canada»
Europe and B r i t i s h Commonwealth Section„
IIo
Nine C h a r t s on F i n a n c i a l Markets Abroad
Chart
Chart
Chart
Chart
Chart
Chart
Chart
Chart
I n t e r e s t A r b i t r a g e , United States/Canada
I n t e r e s t A r b i t r a g e , New York/London
I n t e r e s t A r b i t r a g e f o r German Commercial Banks
I n t e r e s t A r b i t r a g e , Frankfurt/London
S h o r t - t e r m I n t e r e s t Rates
Long-term Bond Yields
I n d u s t r i a l Stock I n d i c e s
Spot Exchange Rates — Major C u r r e n c i e s
—Against U»S» D o l l a r
Chart 9 - 3-month Forward Exchange Rates
1
2
3
U
5
6
7
8
-
OFFICIAL USE ONLY
%
Table 10.
Canada: Treasury B i l l Y i e l d s and Exchange R a t e s
3-rco
U.S.
Canada
Difference
2/
JL
1962-High
Low
5.51
3.01
2.98
2.6U
2.59
0.22
1962-June
7
J u l y 19
S e p t . 27
O c t . 18
Nov.
1
8
IS
22
29
Dec,
6
3.62
5.51
U.99
U.22
U.16
U.09
3.62
3.82
3.71
3.71
2.6U
0.98
2.58
2.23
1.18
l.UU
1.29
0.78
0.98
0.85
0.87
2.93
2.76
2.7U
2.72
2.80
2.81*
2 .81
2.86
2.8U
3-moo
Can.$
£/
0.13
-2.13
-0.55
-2.02
-1.95
-1.82
-l.lii
-0.9U
—0*88
-0.7k
—0.68
-0.67
In
favor
Can.
bill c/
Spot
Can.#
(U.S.
cents
0.8U
-0.11
95.75
91.73
0.U3
+0.56
+0.28
-0.3U
+0.30
+0.35
-OolO
+0.2U
•K).17
+0.20
91.73
92.72
92.8U
92.88
92.97
92.97
92.77
92.83
92.89
93.00
Finance paper
90-179
days
30-89 days
—
3.3/8—1/2
3-5/8—3A
—
—
5
U-i/U~i/2
U-iA-—U—1/2
U-iA
3 - 3A
5-iA—1/2
U-3/8—3A
U—1/2—5-iA
U-l/2—3/U
k
——
—
a / Thursday q u o t a t i o n s . b / Spread between s p o t 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 annumo D i s c o u n t e q u a l s % - ) .
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 .
'
Table 1 1 .
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 . b i l l s
Spread
Canada
over
U.S. b /
sJ
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
Canada
over
over
U.S. f /
U.S. h /
V
s/
1962-High
Low
5.7U
3.18
2.8U
0.19
5.20
U.oU
1.29
0.03
5.U8
1.73
1.U5
0.73
1962-June
6
J u l y 19
S e p t . 26
O c t . 17
31
Nov.
7
lb
21
3.83
5.71*
1.10
2.59
2.29
1.52
1.50
1.33
0.89
1.05
0.88
1.03
1*.31
5.11
5.08
U.56
U.56
li.53
U.27
U.l*2
U.38
1*.1*3
0.6U
1.16
1.33
0.89
0.96
U.95
5.U8
5.36
5.00
5.0U
5.03
U.88
5.01
5.0U
5.06
1.10
1.UU
1.144
lol3
1.19
1.19
1.02
Dec.
28
5
5.20
11.36
lu30
1*.21
3.71*
3.96
3.83
3.91*
1.00
0.73
0.8U
0.80
0.83
1.1U
1.17
1.16
5.19
1.10
l*.8l
0 .82
l*.9l*
0.98
1.03
1.21*
1.18
1.23
1.25
1.15
1.17
1.17
1.17
5.15
5.19
5.10
5.12
5.12
5.03
5.06
5.07
5.09
a / Average y i e l d a t weekly t e n d e r on Thursday,
b / Spread between Canadian a u c t i o n r a t e and composite market y i e l d of U.S. b i l l ori
c l o s e of b u s i n e s s Thursday.
c / Government of Canada 2 - 3 A p e r c e n t of June 1967-68.
d / Spread o v e r U.S. Government 2 - 1 / 2 p e r c e n t of 1963-68.
"e/ Government of Canada 3 - l / U p e r c e n t of October 1979,
f / Spread over U.S. Government 3 - l / U p e r c e n t of 1978-83*
g / Government of Canada 3 - 3 A p e r c e n t of September 1996 - March 1998 c
n / Spread over U.S. Government of 1995•
INTEREST
ARBITRAGE,
iThurtday figures
THREE-MONTH
RATE
UNITED
STATES /
CANADA
j
!
TREASURY
DIFFERENTIAL
AND
BILL
RATES
FORWARD
CANADIAN
DOLLAR
EXCHANGE
COVER
SflEAD IN FAVOR OF CANADA +
RATE
DIFFERENTIAL
WITH
FORWARD
I
NIT INCENTIVE IN FAVOR OF CANADA +
r *r .
J
I
I
"I
J
$j
i
D
INTEREST
ARBITRAGE,
3-MONTH JREASURY
BU.L
RATE D I F F E R E N T I A L
—
3 -M O NTH
NEW
Y O R K / L O N D O N
RATES
AND
FO RW ARD
j
S T ER L I N G
S P R E A D IN F A V O R OF L O N D O N
J
RAT E D I F ' F E R E NTiAt WITH
iWAR D E X ( : H A N G E C O V
"FOF
-
E R
V
IN
1F A V O R
1
K
1
1
M.
1
1
1
1 1
J
S
1
1
I |
1 1
1
D
1959
M
J
"i960
1
S
"
\
1
IN 1A V O R
(>F N E W Y O R K ]
1
1
D
'
1
1 1
M
1 1
J
m f
1
S
1
1 1
D
1 1
M
J
1962
II
1
$
1
T
—
INTEREST
ARBITRAGE
3-MONTH
FOR
TREASURY
. EURO-DOLLAR
GERMAN
BILL3,
DEPOSIT
COMMERCIAL
INTERBANK
BANKS
LENDING
RATE
AND
RATES
.EURO-DO 11A R_-___
GtRMAN TREASURY 11U5
RATE
DIFFERENTIAL
AND
FORWARD
DEUTSCHE
FORWARD
EXCHANGE
MARK
SPREAD IN FAVOR Of FRANKFURT:
RATE
DIFFERENTIAL
WITH
COVER
IN FAVOR OF rRANRH»RT{ + )
I N T I R I A N I LOAN RATI
TREASURY RIUS
D
I960
Note;
S
N
M61
Special forward rale available la German commercial banki.
1*62
INTEREST
ARBITRAGE,
~3-MONTH
TREASURY
INTERBANK
FRANKFURT /
BILLS
LEND ING
L O N D O N
AND
RATES
RATE D I F F E R E N T I A L A N D
(
3-MONTH FORWARD STERLING
— T " "
1
11 "
GERMAN TREASURY I I L I S
I
FOIWAID BATE
RATE
DIFFERENTIAL
WITH
FORWARD
NET INCENTTVE D R U N I T E D : I N G D O M O V E I ^
EXCHANGE
COVER
I
6E1
SHORT-TERM
INTEREST
R A T E S ^
V +,
7
1140
1
3-month Ireatury bill rat« for all countrie< except [japaa (3-mo nth interbank depoA rate) and I Switzerland fc-month da pot it rote) .
3-month role lor U. S. dollar depotilt in London. _
LONG-TERM
BOND
YIELDS
1958
1959
1960
1961
1962
ShaiLL.
INDUSTRIAL
STOCK
INDICES
Nolo: Japan: Index of
SPOT
EXCHANGE
RATES
- MAJOR
CURRENCIES
AGAINST
U.S.
DOLLAR
JUT
FRENCH
FRANC
I
\!!!
3-MONTH
AGAINST
(AGAINST
FORWARD
U.
S.
RATES
DOLLARS!
POUND
AGAINST "POUND
EXCHANGE
STERLING
STERL'NG
- LONDON
- LONDON^
FRENCH FRANC /«
1961
@FedFRASER