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1
• OAWD OF e O V E H N O R *
D I V I S I O N OF I N T E R N A T I O N A L F I N A N C E
H .13
!-• No-o—37 —
December 8, 1961
A CAPITAL MARKET DEVELOPMENTS ABROAD
FED,.
Of
- YD
Io Canada
lie Foreign Bonds Publicly-Issued on International
Markets , 1958-1960, First Half of 1961
III, Eight Charts on Financial Markets Abroad
I. Canada % Money and Capital Markets during. November
Substantial debt-management operations, stable interest trends
and an unexpected weakness of the Canadian dollar in exchange markets
were the principal developments in financial markets in Canada during
November o Canadian Treasury bill and bond yields were at about the same
level on November 29 as they were on October 25» However, a temporary dip
in CanadianJbill yields early in the month, combined with risiiig U.S. bill
rates, brought the Canadian below the U,S, bill yield throughout the month.
Rising UoSo yields also reduced the differential of Canadian bond yields
over those in the United States.
On the debt-management side, sales of government Savings Bonds
added $72,0 million to Treasury receipts. The Treasury also issued $525
million of short- and medium-term bonds largely to refinance maturing issues.
Through the current fiscal year $375 million of new cash has been raised
through short-term bonds. M o r e o v e r , Treasury Refinancing requirements
for the fiscal year ending March 31, 1962, have now been reduced to about
$55.5 million.
Easy conditions continued to prevail in the commercial bank
sector. The liquidity of the banks rose further to 19 per cent during the month,
U per centage points above the required minimum, despite a further 1,5 per
cent rise in seasonally adjusted bank loans. The lending rate on loans
to finance companies was reduced from 5°3/U to 5=1/2 per cent. Moreover,
there were rumors of a reduction early next year in the bank prime lending
rate which had been reduced to 5-1/2 per cent last June, except for finance
company loans. The growth in bank credit, the Treasury deficit and
Exchange Fund operations last month brought the seasonally adjusted money
supply in November to a level ko2 per cent above the end of June level.
The lag in construction activity induced the authorities to
reduce mortgage rates for Government-insured loans to 6-1/2 per cent for
residential construction and to 5-1/2 per cent for low rental housing and
specified municipal public works.
The Canadian dollar was under selling pressure in the exchange
market in the latter part of the month. The spot rate declined from 97.08
U,S, cents on October 26% to 95*97 cents on November 30, The premium on
NOT FOR PUBLICATION
DECONTROLLED AFTER SIX MONTHS
NOT FOR PUBLICATION
*= 2
—
the forward Canadian dollar widened slightly as the spot rate fello
Year-end dividend payments by Canadian corporations to nonresidents and
the decline of Canadian short-term rates on finance
paper contributed
to the selling pressures on the Canadian dollar.
Money market. During November Canadian money markets continued
to enjoy high levels of liquidity and, despite some mid-month declines in
short-term rates, at the end of November yields were little changed from
end-October levels„ The average auction yield on the 3-month Treasury bill
eased as much as 16 basis points early in the month but had returned by
November 30 to the end-October level of 2.50 per cent (see Table and
Chart l)o The 6-month bill showed a similar trend (see Table)» In early
November, yields on short-term finance company paper also declined. The
yield on 30=89 day note is fell from 2.75) per cent on October 27 to 2,5>0
per cent on November 17» Day-to-day loan rates, on the other hand, rose
early in November but eased off later in the month»
During the month, the chartered banks were sellers and the
general public were buyers of Treasury bills (see Table), On balance there
was little change in Bank of Canada and Government Account holdings, but
the Bank made heavy transaction^ on both sides of the market early in the
month o
The yield on the Canadian 3-month Treasury bill fell below the
U.S. bill yield in early November and remained below through the month
(see Chart 1)» However, the premium on the forward Canadian dollar more
than offset the yield advantage for the U.S. bill* As a result, the net
incentive was in favor of the Canadian bill on a covered basis, but the
difference was probably too snail to encourage any movement of funds (see
Table and Chart l)„
Short-term finance paper in Canada yielded higher returns than
similar paper in the United States, but this difference narrowed in midNovember • Early in the month, the yield difference favored Canadian paper
by as much as 62 basis points, and, with the favorable forward rate, some
money moved from the United States to Canada. By mid-November, however,
_the yield difference was almost eliminated and covered investments in Canada
yielded about 0.50 per cent per annum more than similar investments in the U.S.
The following table compares rates offered by leading acceptance houses for
30 to 89 day financial paper in Canada and the United States:
Canada
13
27
2
10
17
. 2.75
2.75
2.75
2.50-2.75
2.50
U.S.
2.13-2.39
2.25-2.50
2.13-2.50
2.13-2.39
2.25-2.50
NOT FOR PUBLICATION
Spread
+Oo36-OO6U
+0.25-0.50
+0.25-0.62
+O.II-O.62
0 - +Oa25
NOT FOR PUBLICATION
- 3 -
Bond market* Bond yields continued to ease during November despite
the large new issue of securities during the month. The MdLeod, Young,
Weir UO bond yield average of non-Government bonds, with average maturities
of 15 years, declined from 5.bl per cent to 5• 35 per cent during the month,
as may be seen in the following table of yields (in per cent per annum);
June 1
10 Provincials
10 Municipals
10 Public utilities
10 Industrials
h.0 Bond yield average
5.62
. 5.82
5.U8
5.60
5.63
Nov. 1
5.36
5.56
. 5.37
5.35
5.U1
Dec. 1
5.30
5.52
5.27
5.32
5.35
Yields on Government securities declined through the first three weeks of
the month but tended to move upward during the last two weeks. However,
for the month as a whole, some "maturities remained below end of October
levels, as noted in the following table:
Maturity
Sept. 1965
Sept. 1972
Jan. 1975-78
Sept. 1983
Sept. 1996-98
June 1
Oct. 26
Nov* 29
U.78
5.08
5.19
5.20
5.09
U.12 .
U.82
U.90
U.9U
U.97
U.09
h.69
U.92
U.97
1.91
The chartered banks purchased $56 million of bonds during the
month while the general public sold $67 million. The Bank of Canada
purchased only $3 million while the Government Accounts reduced 'holdings
of non-marketable bonds by $122 million.
During the month there was a further narrowing of the yield
spread favoring Canadian Government bonds as yields rose in the United
States. The following table compares changes in the spread between selected
Canadian Government bonds and comparable bonds in the United States:
8-year bond
20-year bond
35-year bond
June 1
Oct. 26
Nov. 29
0.96
I.36
1.1*3
0.U2
0.81
1.2U
O.lU
0.78
1.13
A. E. Ames & Co. Ltd., reported an increase in new non-Dominion
Government security issues during the month of about $15U million. While
this is somewhat below the monthly average of new placements during the
first 10 months of the year, new corporate offerings showed a sizeable
increase. The following table compares November offerings with the monthly
average for the January-October period:
NOT FOR PUBLICATION
- U -
NOT FOR PUBLICATION
Provincial
Municipal
Corporate
Total
Monthly average
Jano-Octo
Oct* 30=
Nov. 27
87
38
U6
39
33
82
171
15k
The Minister of Finance offered §52-5 million of new short- and
medium-term bonds on November 13= Of- this, $H80 million is for refinancing
and, $U5 million is to meet new cash requirements„ The Bank of Canada
took $200 million of the new bonds in exchange for maturing issues and
the remainder was offered for cash. The newoffering consisted of three
maturities as follows:
$175 million, 2-3/U per cent, noncallable bonds due June 1, .
1963s priced at 99 per cent to yield about 3»UU per cent to
; maturity;
$2S0 million, 3-l/k per cent, noncallable bonds due October 1,
I96L, priced at 98,80 per cent yielding about 3°70 per cent
to maturity;
$100 million, of H-l/2 per cent noncallable bonds due June 1,
1967, priced at 99*50 per cent, to yield about k«35 per
cent to maturityo
To help meet current year new cash needs, which are expected to
be about $1 billion, the Government has already placed on the market
about $375 million of short-term bonds„ In addition to this, the Finance
Minister reported in late November, that 1961 Savings Bond sales already
totaled $880 million, 1»3 per cent above the i960 level» Total holdings
of Savings bonds since the beginning of the new drive on November 1, 196l,
(see Capital Market Developments Abroads No„ 29, October 13* 1961)
increased about $720 million» Together, these sources have provided over
$1 billion of new funds which is equal to estimated new cash requirements
for the current fiscal year0 However, since the end of June foreign
exchange purchases have probably raised the Government cash needs about
an additional $125 million„
Bank loans and the money supply0 General bank loans showed
further expansion in November and bank liquid assets rose to 19 per cent
of demand deposits, H percentage points above the 15 per cent required
minimumo General bank loans in November advanced above seasonal requirements for the seventh consecutive month» The $82 million rise in seasonally
adjusted loans brought outstanding loans to lu7 per cent above June, when
the expansionary monetary and fiscal policies were made effective» The
money supply held by the public (including savings deposits, which in
Canada are treated much like demand deposits) rose $lU5 million, or 1 per
cent, in November to k«2 per cent above June levels®
NOT FOR PUBLICATION
NOT FOR PUBLICATION
- 5—
As a result of current high levels of bank liquidity> the chartered
banks announced that interest rates on loans to finance houses would be
lowered to the prime lending rate of 5-1/2 per cent. The prime rate was
lowered from a record high of 5-3/U P© r cent last June 1 to 2-1/2 per cent,
but rates for financial houses were kept at 5-3/4 per cent. There is some
expectation that the prime lending rate will be reduced again in'e^rly' 1962, but
no official' statements have yet been made.
Secondary mortgage market. The Central Mortgage Housing Corp.
(CMHC) has taken further steps to develop the secondary mortgage market
in Canada (see Capital Market Developments Abroad, Nos. 11, 19 and 24
of 1961), In November the authorities offered and sold another $15 million
of CMHC mortgage holdings to private groups and organization. The mortgages
were grouped in 43 packages, with a value of from $250,000 to $500,000
in each package. The loans were sold at a premium of $1.79 for each $100
loan. This compares with premiums of $1.17 and $1.35 in the two earlier
sales which totaled $30 million.
Mortgage lending rates. The Canadian authorities announced a
reduction in Government insured mortgage rates to help revive the lagging
construction industry. Although total construction in 1961 is above the
year-ago level, this reflects the early-196l expansion in residential
construction. However, during the April-September period, residential
construction was more than 20 per cent below January-March. Moreover,
third quarter NHA lending was $191 million compared with $21*6 million in
the previous quarter and $118 million a year ago. Therefore, in early
November the authorities announced a reduction of rates for homes built
under the National Housing Act, from a record 6-3/4 per cent to 6-1/2
per cent. At the same time, the Central Mortgage and Housing Corp.,a
Crown-owned company, reduced rates for low rental housing, municipal
sewage, and university residence projects, from 5-3/8 per cent to 5-1/8
per cent and the rate for federal-provincial rental housing and land
assembly projects from 5-1/2 to 5 - l A per cent.
Foreign trade. Imports rose to record levels in the third quarter,
and despite record exports, the seasonally adjusted trade balance showed
a $22.4 million deficit in August. During the first 8 months of the year
the trade surplus totaled $111.7 million compared with a $7.1 million
deficit the year before. The following table shows seasonally adjusted
monthly average trade figures for the periods indicated:
I
II
III
May
June
July
Aug.
Sept.
Exports
Imports
U51.1
463.6
472.2
458.0
463.8
444.6
499.3
455.1
462.7
476.2
513.7
507.9
406.4
187.3
528.1
U91.3
NOT FOR PUBLICATION
Trade
balance
- 6*9
- 0.2
+27.6
-1*8.7
+24.6
+51.9
-22 .u
NOT FOR PUBLICATION
- 6 -
Foreign exchange„ Demands for the Canadian dollar, which were
active in October, eased off in early November, and selling pressures
brought the rate down from 97.73 U.S. cents at the end of October to
95»91 UoSo cents at the end of November» In October, reserves rose $186
million as funds moved on an uncovered basis into Canadian financial paper
and into Government bonds® Some upward pressure on the exchange rate
continued through early November, but at a much reduced rate; by midNovembers the rate moved down. Reduced demand for the Canadian dollar
earlier in the month probably reflected declining rates on Canadian short-term
finance " paper0 However5 year-end divideixi payments by large corporations
to nonresidents played a major role in the declinea
Official Canadian holdings of gold and U.S. dollars during the
current year are shown below in millions of U.S, dollarss
End of
month
I960 - Dec.
1961 - June
July
Aug.
Sept.
Oct.
Gold
U.S.
dollars
Total
885o3
905.9
911.9
919.9
926.6
931.6
9H3.9
1,079.3
1,0U8.U
l,02lu5
997.7
1,179oO
1,928.2
1,985-2
1,960=3
l,9Wi.k
1,921.3
2,110,6
Change
during period
+156.0
- 21.9
- 15.9
- 20.1
+186.3
Stock exchangeo After a 2=rmonth period of decline, Canadian
industrial stock indices moved upward (see Chart 6) . The November rise,
however, was only 2.8 per cent compared with 5»3 per cent in the Standard
& Poor index of industrial stock prices in New York» The following table
compares movements of industrial stock price indices according to DBS
and New York Standard & Poor0
Average for
week ending
DBS
Industrials
• I960
Sept. 2-9
1961 - J u n e 15
Sept. 28
Oct, 26
Nov. 9
Nov. 16
Nov. 23
2U3.6
329.7
336.5
328.6
3hO=3
3)31.7
337 o7
N=Y, Standard &
Poor Industrials
#.69
69.#
70.L?
71o6U
, 7U.28
75.21
• 75-U6
The weekly volume of shares sold on the Canadian exchanges rose
sharply at the end of November, from below $20 million to over $30 million
a week, to the highest weekly volume for the year.
•British Commonwealth Section.
NOT FOR PUBLICATION
-7-
Selected Canadian Money Market and Related Data
3-BO > Trees. bills
Canada
Spread
U . S ^ / over U.S.
i960 - High
Low
1961 - High
Low
5.1U
1.68
3.3k
2.26
1.62
-0.82
lolO
=0ol3
L.53
2.10
2.55
2.17
Canadian dollar
S|^i
discount (-1
3-ao,
forward premium(+)j=/
105.27
100.33
101.72
95.91
<=»«=>
0.99
-0.91
0.U5
-0.56
Net incentive to
hold Can.
bill*/
1.99
-0.57
0.89
-0.20
Oct. 26
0.20
2.50
2.30
97.08
0.13
97.11
0.33
Nov. 2
0.20
2.U7
2.27
96.78
96.75
0.13
0.33
2.1*1
-0.07
96.86
9
2.3U
0.26
96.92
0.19
16
-0.17
2.37
9606U
2.5k
0.28
o.U5
95.75
23
2.12
-0ol3
96.28
2.55
96.13
0.13
0.00
30
2.50
-0o05
2.55
0.26
0.20
95.91
95.97
a/ Average yield at weekly tender on Thursday.
.
b/ Composite market yield for the U.S. Treasury bill on Thursday close of business•
c/ In U.S. cents,
H / Spread between spot rate and 3-month forward Canadian dollar on Thursday
closing, expressed as per cent per annum.
e/ Spread over U.S. Treasury bill (column 3), plus 3-month forward discount or
premium (column 6).
Selected Government of Canada Security Yields
6-mo. Treas. bills
Spread
Canada
ove:
e
j/
U.S
iz
1960 - High
Low
1961 •= High
Low
Oct, 25
Nov, 1
8
15
22
29
2
5.33
1.99
1.37
=0.86
Intermediate
bonda (8 yr.)
Spread
ove;
Canada
e
U.S
i/
5 .55
U0O9
loll
0.21
1.16
3=63
2.35
1.15
-Ooll
L.75
Uo22
0.25
2.72
2.69
2.53
O.OU
0.13
-0.18
,36
0.U2
2.59
2 0 6U
2.73
-0.16
-OolO
-0.06
,22
0.30
,12
0.13
15
15
Oolil
0.25
0.21
Long-term bonds
(20 year)
(35 year)
Spread
Spread
over,
Canada
Canada
u.sj/
5oli2
a
1.61
5.19
U080
0.95
1.59
l.iit
U086
U080
U.81
k.77
Uo8U
U.85
0.81
0.78
0.82
0.72
O.83
0.78
1.2k
1.21
1.22
l.lit
1.18
1.13
L.63
li.96
U.93
U.93
ko90
U.91
Uo91
Average yield at weekly tender on Thursday.
Spread between Canadian auction rate and composite market yield of U.S.
on close of business Thursday.
Government of Canada 2-3/U per cent of June 1967-68.
Spread over U.S. Government 2 - 1 / 2 per cent of 1963-68.
Government of Canada 3 - l A par cent of October 1979 •
Spread over U.S. Government 3 - l A per cent of 1978-83*
Government of Canada 3 - 3 A per cent of September 1996 - March 1998.
Spread over U.S. Government of 199$•
1
/
1.36 • "5.28
0.85
U068
l.Uo
5.23
0.78
L.92
- 8 -
Canada: Changes In Distribution of Holdings of Canadian
Government Direct and Guaranteed Securities
(millions of Canadian dollars, par value)
Bank of Canada
Treas.
bills
Bonds
1961-Jan.
Feb.
Mar.
April
May
June
July
Aug,
Septo
Octo
Nov„
Source;
-•'JUL
- 7
- U7
+ 9
+ 17
- 7U
+ 69
0
Government
Total
-38
+ 15
- 68
- 96
+120
- 25
- 2
+ 59
'= 1
- 22
+ 5
+ L3 + 21
+ 16
+ 21
+ 32
+ 9
+ Uli
+ 111
- 39
+ 3
-125
+ 16
-105
- 9
Chartered banks
Treas*
bills
Bonds
+111
+ 67
- 36
- 70
+ 63
+ 33
+ 16
+107
- 58
+109
- Ii2
- 37
+ 88
• 50
- 52
+ 2li
+ 62
+ 11
+1U8
+ 72
+ U
+ 56
General public
Savings Treas,
bonds
bills
Bonds
- 2
- 6
- 18
- 37
- 33
- 22
- 23
- 29
- 2U
+ h
+720
- U6
- 26
+ 30
+ 61t
- 80
- 7
- 95
- 87
+ Uo
- 3
+ U8
+ 23
+ 39
+
+ 37
+
-
Bank of Canada, Weekly Financial Statistics•
Selected Canadian Financial Statistics
(in millions of Canadian dollars or per cent)
.
lo Money supply: */
Currency and deposits
Less s Govt, deposits
Equals: Privately held
Change in period
_June;
"
200
13,661
52
_July
n
"
Hi,Oil
179
13,882
+ 171
Hi,368
312
Hi,0S&
+ 22U
General bank loans**/
Change in period
5,252
+
28
$,269
+
17
j. Total Govt, securities:
Of which: Treas. bills
Bonds
Savings bonds
17,763
1,885
12,Wi
3,U7U
Uo New security issues*?/
Of which sold in U.S.
5o Chartered bank liquidity:
^
Ca-sh reserve
Cash ratio
Liquid assets
Liquid asset ratio
U73
lit,013
li3
Oct.
.
ll*,399
312
Hi,08?
+
7U
Hi,595
363
1U,232
+ lU5
5,367
+
98
5,378
+
11
5,U99
+ 121
5,581
+
82
17,739
1,885
12,11OI1
'
17,885
1,885
12,577
3,li23
18,061
1,885
12,776
"3',li00
18,018
1,885
12,729
3',libli
l8,581i
1,885
12,590
' If, 109
725
11
1,086
12
660
0
l,02li
0
6I1O
6
1,159
7
1,027
8.1
2,312
18.3
1,025
. 8.1
2,317
18,3
1,039
8.1
2,Ul5
18.9
1,062
8.1
2,li65
18.8
1,072
8.2
2,U73
18.8
1,071
8.1
2,516
19.0
13,861
Aug.
;
"
Sept,
-• .
Hi, 3 6 8
Nov,
r
a/ Seasonally adjusted.
':
'
b/ Sources A. E. Ames & Co., Ltd. (Includes public and private securities.)
6
- 12
+ 1
37
35
li2
31
67
NOT FOR PUBLICATION
II.
- 9 -
Foreign Bonds Publicly-Issued on International Markets, 1958-1960, First
Half of 1951
:
:
:
During the first half of 1961, $393 million of foreign bonds
(excluding private placements and borrowing by the International Bank) were
issued in major international capital markets (Canada, Germany, the Netherlands,
Sweden, Switzerland, United Kingdom, United States) according to a semi-annual
tabulation prepared by the staff of the International Bank for Reconstruction
and Development. Refunding issues accounted for $88 million, and new issues
for $305 million. All of the refunding and $227 million of the new issues
were floated by Governments or political subdivisions, and $77 million by
private companies.
Publicly-Issued Foreign Bonds in Major Capital Markets
1958 - I960, First Half of 1961
(nominal amounts, millions of U.S. dollars)
~~
Canada
Germany
Netherlands
Sweden
United
Kingdom
Switzerland
United
States
Total
1958
21.9
New
Refunding
Total
of which,
private
—— .
—
——
——
2lT9
—
(11.9)
—
126.0
U6.6
172.6
32.7
2.8
M
(35.5)
—
617.1 797.7
617.1
U9.li
817.1
(35.2) (82.6)
"1959
31.0
New
Refunding
Total
of which, private
—
3lT0
—
—
30.2
67.8
98T0
—
—
95.8
11.6
107.3
5153 7 5 o 3
(5U.1)
(11.0) (65.1)
101.0
31.3
296.3
83.0
9.U
305.6 51W.T
IU.5.7 602.6
68.8 Hio.2
I960
New
Refunding
Total
of which,
private
1U.3
12.0
—
l O
—
12T0
HI3
—
—
—
—
(5.6) (62.7)
.
39.2
1^.3
132.3
(15.0) (83.3)
1961 (1st half)
20.2
New
Refunding
Total
of which,
private
Source:
IBRD
0.3
2072
—
-
(0.3)
Economic Staff
6.8
12.3
20.7
33.0
~ o
(U.o)
—
56.0
56.0
30li.7
119.1
11.5.
130.6
90.0
112.0
——
(71.0)
(2.0) (77.3)
ttor PUBLICATION
88.2
90.0 392.9
NOT FOR PUBLICATION
- 1 0 -
According to the tabulations of the IBRD, the total volume of
foreign public issues reached a postwar peak in 1958, and then declined
steadily in 1959 and I960 „ The volume was also somewhat smaller in the
first half of 1961 than in the corresponding period of 1960=
In view of the fragmentary nature of the data, variations in
the total volume of new foreign issues are less significant than shifts
in the composition of borrowers and lenders„ Between 1958 and 1961 new
foreign issues declined more than average in the United States market
(from $617 million in 1958 to $296 million in i960 and $90 million in
the first half of 1961) and rose sharply in Switzerland (from $33 million
in 1958 to $101 million in i960 and $119 million in the first half of
196l)o The rise in foreign flotations in Switzerland is not surprising,
as Swiss long-term interest rates are the lowest in the world (in part
because the-export of long-term capital is controlled), In the fall of
19585 the Swiss National Bank lifted a two-year ban on foreign flotations,
and began to approve an average of about one new issue a month„ At the
beginning.of 1961 the Swiss authorities lifted an unofficial ban on
flotations by Common Market countries= Also, in view of the continued
high liquidity of the Swiss capital market and an excessive expansion
of- construction a c t i v i t y , the Bank approved a larger number and volume
of foreign flotations„ In April 1961, the Netherlands also lifted the
ban, imposed in 1955, on issues of countries outside the Benelux Union*
Foreign flotations on the London market also have dropped sharply
since 1958, but the explanation probably lies more with the borrowers than
the lender, as borrowings by the independent members~of the outside sterling
area dropped sharply; the tabulation excludes borrowing by colonies=
On the whole, however, the composition of the group of borrowers
.has been fairly stable for the past three years„ Until the first half of
1961, by far the largest category of borrower was Canadian political subdivisions. From 1958 through I960, Canadian issues, which are mainly those
of municipalities, accounted for 35 to U0, per cent of total foreign new
issueso The volume of Canadian issues dropped off. sharply in the first
half of 1961, in part because of proposed legislation to increase"the nonresident withholding tax on Canadian Government and provincial bonds, and
in part because Governor Coyne of the Bank of Canada had warned that borrowing abroad entailed an exchange risk„ Since the Canadians have floated
public loans only in the United States, the drop in Canadian flotations was
a major cause of the lower volume of public issues on the U0S= market in the
first half of 1961=
The Commonwealth of Australia has been a regular borrower on
international markets over the past few years, and was the largest borrower
in the first half of I96I, On the average, the third largest borrower was
the Government of Israel, which floated a loan every year*
NOT FOR PUBLICATION
NOT FOR PUBLICATION
- 11-
The proportion of private issues not guaranteed by governments
rose from 10 per cent of total new foreign issues in 1958 to 2$ per cent
in the first half of 1961. Virtually all of the private issues in 1961
were in Switzerland. Among the principal private borrowers in Switzerland
this year were Netherlands and British companies, and the IBM World Trade
Corporation of the United States,
In assessing these data, it should be remembered that they
represent only a small fraction of total long-term international portfolio
investment, because the following kinds of transactions are.excluded:
(1) private placements; (2) borrowing by the International Bank; (3)
new equity issues; (1;) transactions in outstanding issues of both bonds
and stocks, and {$) long-term commercial bank loans. Moreover, it should
be borne in mind that the IBRD compilation covers new issues on various
markets, without reference to the residence of the purchasers. For
instance, a substantial proportion of European issues on the U.S. market
is known to have been purchased by European residents. It is also known
that a large part of the funds available on the Swiss market for longterm investment is supplied by foreigners«, Therefore, the IBRD compilation
is not exactly comparable with balance of payments data, which are in terms
of residence.
According to U.S. balance-of-payments data, new issues of foreign
securities (bonds and stocks) purchased by U.S. residents in the first
half of 1961 amounted to $308 million, and purchases of both new and old
issues of bonds alone amounted to $U?0 million. In the first half of 1961,
most of the $90 million of new issues on the U.S. market compiled by the
IBRD was probably sold to U.S. residents, and therefore is included in the
bala^a*-of -paymentf figures cited above. Excluded from the IBRD tabulation,
but included in the payments figures, are also sales of foreign stocks
(new and old issues) to U.S. residents, ($U?0 million), and new long-term
bank loans to foreigners ($l£0 million net of repayments). Total
acquisitions of long-term foreign portfolio assets by U.S. residents thus
amounted to $1,190 million in the first half of 1961, compared with the
IBRD figure of $90 million for publicly-issued bonds on the U.S., market0
International Financial Operations Section.
Ill.
Eight Charts on Financial Markets Abroad
Chart
Chart
Chart
Chart
Chart
Chart
Chart
1 2 3 1* £ 6 7 -
Interest Arbitrage U.S.'/Canada
Interest Arbitrage New York/London
Interest Arbitrage New York/Frankfurt
Short-term Yields
Long-term Yields
Industrial Stock Indices
Major Currencies in Terms of
Spot United States Dollar
Chart 8 - 3-month Forward Rate—London Quotations
NOT FOR PUBLICATION
INTEREST ARBITRAGE, U N I T E D S T A T E S / C A N A D A
Thunday
l i g u m
T H R E E - M O N T H TREASURY BILL RATES
v
VV\~
~
P., c „ . p . , onnu.
V
~
>y^s/
UNITED STATES
RATE DIFFERENTIAL A N D F O R W A R D C A N A D I A N DOLLAR
SPREAD IN FAVOR OF CANADA +
1 Dlicoeel
RATE DIFFERENTIAL W I T H F O R W A R D E X C H A N G E COVER
NET INCENTIVE IN FAVOR OF CANADA +
INTEREST A R B I T R A G E / N E W Y O R K /
LONDON
Friday figures
3 - M O N T H TREASURY BILL RATES
^ W'
RATE DIFFERENTIAL A N D
3 - M O N T H FORWARD STERLING
RATE DIFFERENTIAL W I T H
F O R W A R D E X C H A N G E COVER
IN FAVOR Of LONDON
IN FAVOR OF NEW YORK
1959 ;
1960
INTEREST A R B I T R A G E FOR G E R M A N C O M M E R C I A L B A N K S
Friday figures
T
"
3 - M O N T H TREASURY" BILL" RATES A N D ]
G E R M A N 3 - M O N T H I N T E R B A N K L O A N RATES
INTERS AN K LOAN RAT
l/~\
RATE D I F F E R E N T I A L A N D F O R W A R D D E U T S C H E M A R K ]
,1 LOAN RATE
FORWARD RAJTE DISCOUNT (-)
RATE D I F F E R E N T I A L W I T H F O R W A R D E X C H A N G E C O V E R
INTERBANK
10AN
SAT!
/
TREASURY I I I L S
J
Note
Special forward dollar rate available to German commercial banks.
v
r
-
SHORT-TERM INTEREST RATES *
tUtO-DOUAt
• tOMDOWt
/r\
A'
|
1959
#
j \
CANADA
1961
19*2
3-month Ireosury bill roles for oil countries except Japan (3 month interbank deposit rale) and Switzerland (3-month deposit rale) |
3 month rale for U. S. dollar deposits in London.
L O N G - T E R M B O N D YIELDS
./ V
h-
I N D U S T R I A L STOCK I N D I C E S *
Japan, lode* of oil slocks Iroded on Tokyo exchongi
1%
M A J O R CURRENCIES I N TERMS OF THE SPOT U . S . DOLLAR
SWISS FIANC
IE1GIUM FBANC
'
VI
3 - M O N T H FORWARD RATES - LONDON QUOTATIONS
PREMIUM +
flGERMAN MARK
V\
PREMIUM +
DUTCH GUILDER
FRENCH FRANC /
D
@FedFRASER