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BOARD OF GOVERNOR* Diva,ON OF I Wt*RN*TI6NALFINANCE. H .13 January 2 6 / 1962 No, liU CAPITAL MARKET DEVELOPMENTS ABROAD Io II, I, Germany: Germany Nine Charts on F i n a n c i a l Markets Abroad Money and C a p i t a l Markets during December D e s p i t e s u b s t a n t i a l r e p a t r i a t i o n of money-market f u n d s from abroad by German commercial banks, t h e money market i n Germany remained t i g h t during December and short-money r a t e s moved up a p p r e c i a b l y l a t e i n the month» On December l £ t h e Bundesbank removed i t s charge of 0 . 2 5 per c e n t f o r buying forward d o l l a r s t o slow down t h e i n f l o w i n t o Germany» The r e t u r n of a s s e t s from abroad c o n t r i b u t e d t o a sudden r i s e i n E u r o - d o l l a r and s t e r l i n g d e p o s i t r a t e s i n London i n t h e second h a l f of t h e month (see C a p i t a l Market Developments, No, U3, January 19, 1962). A f t e r the t u r n of the y e a r c o n d i t i o n s i n the F r a n k f u r t market changed a b r u p t l y . Commercial banks began s h i f t i n g f u n d s out of Germany i n very l a r g e volume t o take advantage of a t t r a c t i v e money-market y i e l d s abroad <, On January 2, the Bundesbank r e i n s t a t e d a charge of 0»2$ p e r cent f o r d o l l a r swaps, r a i s e d i t t o 0,38 p e r c e n t on January 8 and t o O.^O p e r c e n t on January 10, presumably i n an a t t e m p t t o slow down t h e o u t f l o w . The Bank again reduced i t s s e l l i n g r a t e on 60- t o 90-day Treasury b i l l s on January U, as the a u t h o r i t i e s continued t o promote lower r a t e s in Germany. As a r e s u l t , money.rates d e c l i n e d a p p r e c i a b l y in e a r l y January i n s p i t e of t h e c a p i t a l exports„ The German bond market maintained i n t o December t h e improvement which commenced i n mid-November, The f i r s t s i g n i f i c a n t a c t i v i t y i n i n d u s t r i a l and F e d e r a l agency s e c u r i t i e s s i n c e J u l y took p l a c e as s e v e r a l l a r g e new i s s u e s were absorbed i n December a t t h e 6 per cent r a t e e s t a b l i s h e d in November» The improved market tone suggests t h a t f o r e i g n p u r c h a s e r s may, have r e - e n t e r e d the German bond market during December in some volume, e s p e c i a l l y s i n c e t h e l a t e s t German balance-of-payments e s t i m a t e s show f o r November a s l i g h t i n f l o w of p r i v a t e long-term c a p i t a l a f t e r s e v e r a l months of outflow during the B e r l i n c r i s i s . On t h e other hand, stock p r i c e s had a downward tendency in December and e a r l y January „ During the course of 1961 German i n t e r e s t r a t e s moved to. s u b s t a n t i a l l y lower l e v e l s , S h o r t - t e r m r a t e s and commercial bank loan and d e p o s i t r a t e s d e c l i n e d i n the f i r s t t h r e e - q u a r t e r s of the y e a r , and the Bundesbank twice reduced i t s d i s c o u n t r a t e s , a s may be seen i n the f o l l o w i n g summary of i n t e r e s t r a t e s ( i n per cent p e r annum): NOT FOR PUBLICATION DECONTROLLED AFTER SIX MONTHS NOT FOR PUBLICATION January - 2 ~ S p r i n g 1959 Low p o i n t 19% — i December Discount r a t e k 3 3 T r e a s u r y b i l l s (60-90 day) 3-3/k 2 2 3.9k u.uu 3.00 . 3.88 2,31 2.69 8.50 7.50 3.50 2.75 Interbank loan r a t e s : Day-to-day Three-month Commercial bank r a t e s : Loans (maximum) Savings d e p o s i t s (6-12nm) Time d e p o s i t s (6-12 mos,) Bond y i e l d s : Mortgage .. ^ Industrial Public a u t h o r i t i e s T o t a l bonds L.25 3.5o 6.2 5.8 6.1 6.1 6.0 6.1 6.0 6.0 .. 7.25 3.25 2.50 5.8 5.7 5.6 5.7 •3ond y i e l d s a l s o d e c l i n e d u n t i l m i d - y e a r , b u t began t o r i s e i n J u l y r e f l e c t i n g t h e e f f e c t of t h e B e r l i n . c r i s i s on t h e German c a p i t a l market. C a p i t a l e x p o r t s by t h e commercial b a n k s , which t h e Bundesbank has been p r o m o t i n g , h e l p reduce o f f i c i a l r e s e r v e s and e a s e p r e s s u r e s on t h e key c u r r e n c i e s , b u t t h e y a l s o h e l p t i g h t e n the'German money market and t h e r e b y impede e f f o r t s t o lower t h e i n t e r e s t r a t e s t r u c t u r e . I t i s i n t e r e s t i n g t h a t , w h i l e bank r a t e and t h e T r e a s u r y b i l l r a t e a r e a s low 5 o t h e r German i n t e r e s t r a t e s a t the end of 1 9 6 l were s u b s t a n t i a l l y above t h e low p o i n t s r e a c h e d i n t h e s p r i n g of 1959 when t h e monetary a u t h o r i t i e s l a s t made an e f f o r t m a t e r i a l l y t o lower t h e l e v e l of rates. I n t h e f o r e i g n exchange m a r k e t , t h e German c u r r e n c y s t r e n g t h e n e d d u r i n g December, The s p o t r a t e moved up i n e a r l y December, r i s i n g above p a r a g a i n s t t h e U.S. d o l l a r , and climbed f u r t h e r in e a r l y J a n u a r y . The f o r w a r d premium of t h e D-mark a g a i n s t t h e U.S. d o l l a r widened f r o m 0 . 6 0 p e r c e n t p e r annum on December 1 t o a peak of 1 . 3 0 p e r c e n t on December 22 and dropped back t o 1 . 0 5 p e r c e n t on J a n u a r y 1 2 . (See C h a r t s 8 and 9)« German f o r e i g n - e x c h a n g e l o s s e s (measured by t h e combined h o l d i n g s of t h e Bundesbank and t h e commercial b a n k s ) came t o an end i n November. During December, t h e Bundesbank's r e s e r v e s r o s e by a b o u t $350 m i l l i o n b u t we do n o t y e t know how much t h e i n c r e a s e w i l l be o f f s e t by commercial bank s a l e s of " >liquid assets in foreign centers. • Unexpectedly s e a s o n a l l y - a d j u s t e d German e x p o r t s r o s e s h a r p l y i n December t o a leve n o t f a r from -he a l l - t i m e h i g h of A p r i l 1961. The t r a d e s u r p l u s widened from an a v e r a g e of a b o u t $86 m i l l i o n f o r October and: November t o $135 m i l l i o n f o r December, an a n n u a l r a t e of $ 1 , 5 b i l l i o n compared w i t h t h e 1961 r e c o r d l e v e l of $ 1 . 8 b i l l i o n * NOT FOR PUBLICATION NOT FOR PUBLICATION - 3- ^ Money market„ To meet s e a s o n a l c r e d i t needs and f o r window d r e s s i n g y e a r - e n d balance s h e e t s , German commercial banks r e p a t r i a t e d f u n d s from abroad a t an a c c e l e r a t e d pace i n t h e second half of December. The foreign-exchange h o l d i n g s of t h e F e d e r a l Bank i n c r e a s e d by $66 m i l l i o n in t h e f i r s t two weeks and $290 m i l l i o n i n t h e second two weeks of December. The December 15 d e c i s i o n of t h e Bundesbank t o remove i t s charge of 0 . 2 5 per c e n t f o r p r o v i d i n g forward d o l l a r cover appeared t o r e f l e c t a d e s i r e t o stem the i n f l u x of f u n d s . D e s p i t e t h i s s u b s t a n t i a l i n f l o w , t h e German money market remained t i g h t throughout December* Between December lU and 29, t h e r a t e on d a y - t o - d a y money i n F r a n k f u r t r o s e from 2.69 t o 3.00 p e r c e n t and on 3-month i n t e r b a n k l o a n s from 3 . 6 3 p e r c e n t t o 3<>88 p e r c e n t . (See Table) The demand f o r cash appears t o have been e x c e p t i o n a l l y h i g h , p a r t l y because Christmas was on a Monday. Moreover, a l a r g e p a r t of t h e i n f l o w of f o r e i g n exchange did n o t c o n t r i b u t e t o the l i q u i d i t y of t h e money market because t h e s e f u n d s were i n tended t o enhance the cash p o s i t i o n of the banks. A f t e r t h e t u r n of t h e y e a r , t h e money-market p o s i t i o n was r e v e r s e d , as domestic requirements f o r cash and c r e d i t d e c l i n e d s e a s o n a l l y . A t t r a c t e d , , a t l e a s t i n p a r t , by t h e h i g h y i e l d s a v a i l a b l e i n o t h e r European money markets, a very l a r g e amount of banking f u n d s moved from Germany e a r l y i n January. In t h e f i r s t f o u r b u s i n e s s days i n t h e month, t h e Bundesbank's foreign-exchange r e s e r v e s dropped by $386 m i l l i o n . The bank r e i n s t a t e d a charge of 0 . 2 5 p e r cent f o r d o l l a r swaps on January 2 and r a i s e d i t t o O.38 p e r cent on January 8 and t o 0.50 p e r c e n t on January 10. These s e v e r a l small i n c r e a s e s i n the c o s t of forward d o l l a r cover t o the German commercial banks suggests an e f f o r t on t h e p a r t of t h e Bank t o moderate t h e outflow of funds but not t o r e v e r s e i t . On January U, i n f a c t , t h e Bundesbank provided an a d d i t i o n a l i n c e n t i v e t o p l a c e funds abroad by reducing i t s s e l l i n g r a t e on 60- t o 90-day Treasury b i l l s from 2.00 t o 1.88 p e r c e n t . D e s p i t e the s h i f t of commercial banking f u n d s abroad, s h o r t - t e r m money r a t e s i n F r a n k f u r t d e c l i n e d r a p i d l y in e a r l y January. The changes i n i n t e r b a n k loan r a t e s i n F r a n k f u r t between December 29 and January 12 were as f o l l o w s ( i n p e r c e n t per annum): Day-to-day money 30-day money 90-day money December 29 January 12 3 U - h-l/k 3-3/U - U 1 - 1 / 2 - 1-3/U 2-1/2 - 2-7/8 2-5/8 - 3 German banking c i r c l e s have e s t i m a t e d t h a t t h e c i r c u l a t i o n of prime acceptances of banks and l e a d i n g f i r m s have gone up by about 50 p e r cent i n the l a s t s i x months. This i n c r e a s e i s a t t r i b u t e d c h i e f l y t o t h e f a c t t h a t German p r i v a t e d i s c o u n t r a t e s have been lowered s e v e r a l times while those abroad have tended t o r i s e . In F r a n k f u r t t h e quoted r a t e on prime bankers' acceptances f e l l from 3-15/16 p e r c e n t on January 16, 1961 t o 2-3/U per cent on December 15. A F r a n k f u r t e r A.Z. r e p o r t i n December estimated t h a t a NOT FOR PUBLICATION NOT FOR PUBLICATION 90-day discount c r e d i t cost about k-3/h per cent in Germany, between 5 t o 5-3/U per cent in the Netherlands s 5 - 3 / 8 t o 5-7/8 per cent i n Switzerland, around 6 per cent ^ n rTm'+.pH States and 9 per cent i n London. r a c t o r s a f f e c t i n g commercial bank r e s e r v e s . During the months of October and November, German commercial banks were able t o reduce t h e i r borrow* ings from the Bundesbank, as f i n a n c i a l markets i n Germany began to recover from the e f f e c t s of the Berlin c r i s i s . In the d i s t u r b e d conditions of the t h i r d q u a r t e r , commercial banks borrowed DM 360 m i l l i o n from the c e n t r a l bank t o meet the need for r e s e r v e s which developed d e s p i t e s e v e r a l reductions i n r e s e r v e requirements during the p e r i o d , Changes in the p r i n c i p a l f a c t o r s a f f e c t i n g commercial bank r e s e r v e s t o the end of November (in m i l l i o n s of D-marks) as shown in the Bundesbank's Monthly Report were! I960" Technical f a c t o r s Currency Public a u t h o r i t i e s dep. Central b a n k ' s net exchange Other 1961 • __L_ III Oct 0 Nov, +U7U - 6 H -932 -•1P16U -3,082 - 2 , 9 1 1 -I9OU6 - 160 - 21 + 29 +11< +106 2,75k +2,16L +2,210 +U12 +38O +328 +U9 +2U7 - U8 +230 -231 +166 IV Total + 986 Policy f a c t o r s Open market operations Central bank advances Total Changes i n r e q u i r e d r e s e r v e s II 32 - 962 - 910 +190 +179 -U36 -312 =720 -205 +529 .685 -506 +360 -L67 - U2 +U16 -282 -7L8 -925 -156 -1U6 -509 +13U -78k - 1 , 0 5 3 -1,0LL -I4O3 +165 -59 - If t h i r d - q u a r t e r developments a r e omitted, two important changes a f f e c t i n g bank r e s e r v e s in Germany occurred between the f i r s t half of the year and October-November = These changes s u b s t a n t i a l l y o f f s e t each other in t h e i r impact on r e s e r v e a v a i l a b i l i t i e s , In the f i r s t p l a c e , a d d i t i o n s t o the c e n t r a l bank's holdings of f o r e i g n exchange supplied r e s e r v e s t o the banking system e a r l i e r in the year but a l i g h t d r a i n s on bank, r e s e r v e s occurred from the small foreign-exchange l o s s e s of October and November0 On the other hand, t h e d e p o s i t s of f e d e r a l and l o c a l governments a t t h e Bundesbank absorbed s u b s t a n t i a l amounts of r e s e r v e s e a r l i e r i n I960 but t h e s e accounts had s h i f t e d to a small d e f i c i t i n October and November, l a r g e l y a s a r e s u l t of the d i s appearance of the Federal Government's cash surplus i n mid-196l, NOT FOR PUBLICATION NOT FOR PUBLICATION - 5 - Bond marketo The improved t o n e of t h e bond market which became e v i d e n t i n mid-November was maintained during December 0 (See Chart 6 and Table) During; t h e month , t o t a l p l a c i n g s of f i x e d - i n t e r e s t s e c u r i t i e s amounted t o DM 89? m i l l i o n ($22U m i l l i o n ) , the h e a v i e s t volume s i n c e l a s t February. S e v e r a l l a r g e i s s u e s were r e a d i l y absorbed. Following t h e DM 60 m i l l i o n 6 p e r c e n t loan of the I n d u s t r i e k r e d i t b a n k on November 20* two other l a r g e i s s u e s were o v e r s u b s c r i b e d : a DM 105 m i l l i o n 6 p e r cent o f f e r i n g of t h e F e d e r a l P o s t on December 5, and a DM 150 m i l l i o n 6 p e r cent o f f e r i n g by Siemans, t h e f i r s t i n d u s t r i a l f l o t a t i o n s i n c e J u n e o n December 18 b The f i n a n c i a l p r e s s i n d i c a t e s t h a t a d d i t i o n a l i n d u s t r i a l and l o c a l government o f f e r i n g s a r e expected i n t h e near f u t u r e < Recent new s e c u r i t y placements i n Germany (nominal v a l u e s i n m i l l i o n s of D-marks, monthly or monthly average) were as f o l l o w s : Mortgage I960: IV 1961: I II III Oct. Nov, Dec* g / 269 539 531 li6? 562 U00 6ia Industrial Public authorities Uo-»... 17 128 Wl5 103 86 <**=> 6 129 105 150 Foreign ' konc*s — •="=> h — Total bonds Shares 121 1,125 7UU 613 97 229 1U1 - y 263 625 655 897 100 68 126 Total securities 518 l,35L 885 876 725 723 1,023 . Return of f o r e i g n p u r c h a s e r s probably c o n t r i b u t e d t o the r e c e n t s t r e n g t h of t h e bond market i n December, The l a t e s t balance-of-payments e s t i m a t e s a v a i l a b l e show t h a t the heavy outflow of long-term p r i v a t e c a p i t a l , which r e s u l t e d from t h e B e r l i n c r i s i s , reached a peak i n August-September, was reduced i n October and became a s l i g h t s u r p l u s i n November» The s h i f t from n e t f o r e i g n purchases t o n e t s a l e s of s e c u r i t i e s during the B e r l i n c r i s i s was undoubtedly an important f a c t o r i n t h e l a c k of a c t i v i t y in t h e market i n the t h i r d q u a r t e r o For example, f o r e i g n purchases of German bonds "accounted i n t h e s i x months from October I960 t o March 196l f o r n e a r l y UO p e r cent of t h e n e t p l a c i n g of domestic f i x e d i n t e r e s t s e c u r i t i e s during t h a t p e r i o d , " according t o t h e Bundesbank» From June f o r e i g n s a l e s of bonds exceeded purchases ( i n m i l l i o n s of D-marks) as f o l l o w s ; June, 205 J u l y , 135 August, 1135 and September, 87 Stock marketo The r e a c t i o n i n stock p r i c e s which commenced i n mid-November continued d u r i n g December. (See Chart 7 . ) The t o t a l index of share p r i c e s of t h e F r a n k f u r t e r A.Z* d e c l i n e d from 229*72 on November 17 t o 219«81 on December 12 and was a t 216.81 on January 19• P o l i t i c a l u n c e r t a i n t i e s and p r o f i t - t a k i n g a r e given as t h e reason f o r the r e c e n t market weaknesso Recent l e v e l s of t h e F r a n k f u r t e r A.Z. index were (Dec. 31, 195)8 equals 100)s NOT FOR PUBLICATION NOT FOR PUBLICATION J u l y 31 Aug. 31 Oct, 13 31 Nov. 17 223.80 203.38 206,35 219.36 229,72 1962: - Nov. 30 Dec. 12 29 227.36 219.81 220.92 Jan, 217.25 216.81 5 19 6 - The Ford Motor Company of D e t r o i t announced ori^January 2k t h a t i t would apply f o r ' - l t i s t i n g s of i t s common stock on t h e F r a n k f u r t and Dusseldorf exchanges „ The Deutsche Bank o f F r a n k f u r t w i l l soon make an o f f e r i n g of 150,000 s h a r e s of Ford"common s t o c k . The o f f e r i n g w i l l n o t i n c r e a s e t h e t o t a l number of s h a r e s o u t s t a n d i n g or c o n s t i t u t e new f i n a n c i n g . I t i s designed t o widen t h e market f o r Ford s h a r e s and Ford p r o d u c t s , Foreign trade» S e a s o n a l l y - a d j u s t e d German e x p o r t s r o s e s h a r p l y i n December t o the second h i g h e s t f i g u r e on r e c o r d . Even with a s u b s t a n t i a l expansion i n i m p o r t s , t h e German t r a d e s u r p l u s was about $135 m i l l i o n compared with an average s u r p l u s of $86 m i l l i o n during t h e two preceding months. Recerfb s e a s o n a l l y - a d j u s t e d German t r a d e f i g u r e s (monthly averages or monthly i n m i l l i o n s of U.S. d o l l a r s ) were: Calendar ' y e a r I960 1961 Exports Imports Surplus I ~ Q u a r t e r l y - 1961 IV. II III Monthly - 196l October November December 1,060 l,oL7 1,077 1,060 1,058 1,056 987 1,131 m 911 852 936 911 955 97k 897 996 10li 1U7 195 Ihl 151 103 82 90 135 9k8 a / Preliminary Foreign exchange r e s e r v e s . The d e c l i n e i n German exchange r e s e r v e s ( a s measured by t h e combined h o l d i n g s of the c e n t r a l bank and commercial banks) came t o an end i n November, T o t a l d e c l i n e s of $8?U m i l l i o n were recorded between August and October and a drop of only $6 m i l l i o n was shown f o r November. During December-* t h e Bundesbank r e p o r t e d a gross i n c r e a s e of $358 m i l l i o n , but -the amounts of f o r e i g n money-market a s s e t s sold by the commercial banks a r e n o t y e t a v a i l a b l e « On ..January 15 t h e Bundesbank r e p o r t e d r e s e r v e l o s s e s of $62U m i l l i o n . Recent changes i n German r e s e r v e s i n 1961 have been as f o l l o w s ( i n m i l l i o n s of U.S. d o l l a r s ) s NOT FOR PUBLICATION NOT FOR PUBLICATION Jan. to Mar» Apr, to June - 7 - Aug0 Se£t> Oct. Nov. Dec. C e n t r a l bank +300 -282 -106 ~U73 + 9 - 3h +358 Commercial banks +L79 +h0k +115 + U8 "250 + hi + 28 n.a. +779 I r a + °U25 =2itl -208 - n.a. Total 9 6 a / A f t e r s p e c i a l d e b t prepayments of $776 m i l l i o n to t h e United S t a t e s ana t h e United Kingdom c The t o t a l would be a r e s e r v e g a i n of $898 m i l l i o n , i f a d j u s t e d f o r t h e s e t r a n s a c t i o n s . Foreign exchange0 The f o r e i g n exchange market r e p o r t e d a good d e a l of a c t i v i t y e a r l y in December, i n p a r t perhaps as a response t o rumors of a r e v a l u a t i o n of the I t a l i a n l i r a which a f f e c t e d l e a d i n g European exchange markets e a r l y i n t h e month. The spot D-mark moved above par with the U.S. d o l l a r on December 8 and remained above p a r i t y t h e r e a f t e r 3 (See Chart 8 ) , The forward D-mark premium widened a p p r e c i a b l y during t h e month t o a peak of I . 3 0 per c e n t p e r annum on December 22 and was a t 1 . 0 5 per c e n t on January 12. (See Table and Chart 9 ) . The Bundesbank's commitments to German commercial banks t o swap U.S. d o l l a r s f o r D-marks a r e thought t o have r i s e n i n January, b u t no f i g u r e s on t h e s e commitments have been p u b l i s h e d s i n c e the l a t t e r p a r t of October. These e s t i m a t e s showed a peak i n swap commitments of DM 3.95 b i l l i o n or n e a r l y $1.0 b i l l i o n on August 11 as t h e f o l l o w i n g f i g u r e s show ( i n b i l l i o n s of D-marks) Jan. 7 March 31 A p r i l 28 June If? 30 J u l y lit 31 II. Chart Chart Chart Chart Chart Chart Chart Chart 1.95 1.85 2.17 3.U2 3.13 3.U3 3 060 Aug. 11 31 S e p t , . 1$ 30 Oc-to 7 . lh 23 3.95 3.50 3.10 2.60 2.50 2.80 3.02 Nine Charts on F i n a n c i a l Markets Abroad 1 2 3 U 5 6 7 8 - I n t e r e s t A r b i t r a g e s 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 Currencies Against U.S„ D o l l a r Chart 9 - 3-month Forward Exchange R a t e s Germany: S e l e c t e d Money Market Yields and Exchange Rates (per c e n t p e r annum) 3-mo. Eurodollar de3-moo i n t e r posits . bank l o a n s London Frankfurt 196l-0ct. 6 Nov. 10 17 3.22 3-31 2k 29 3.So 3.63 3.81 ^.75 3.88 3.88 UoOO 3.63 3.63 3.63 3.63 3.63 3.63 3.75 3,88 1962-Jan. 5 12 3.So 3.38 3.00 2.79 Dec. 1 8 15 22 3.hk Germany; Spread in favor - London ^ -0.75 -0.32 -0.19 -0.13 *=>«= +0 =18 +0.12 +0ol3 — +0.# +0.59 U.K.' -0.60 -0.73 -0.65 -0.60 —0 060 -0.85 -0.98 -1.30 -1.15 6.00 5.31 6.31 5.31 5.28 5.25 5.25 5.28 5.28 2.13 2.00 ' 2.00 2.00 2.00 2.00 2.00 2.00 2.00 2.31 2.U7 2.53 2.55 2.53 2.57 2.63 2.60 2.67 -0.95 -1.05 5.3U 5»3U 1.88 1.88 2.7U 2.76 -0.25 «=0o2f? -0.25 -0.25 -0.25 -0.22 -0.2$ ==>=> — -0.25 -0.50 Ger. U.S. S e l e c t e d Loan* Deposit and S e c u r i t y Rates (per c e n t per annum) 5-1/2% Railway 1958-83 Public authorities 111 6-12 mo. d e p o s i t s Savings 1958-March June Sept. Dec. 8.00 7.75 7.50 7.50 U.00 UoOO 3.25 3.25 3.75 3.75 3.00 2.75 — 1959-March June Sept. Dec. 7.25 7.25 7.50 8.50 3.25 3.25 3.25 3.25 2.50 2.50 2.50 3.25 5oU 5.5 5.7 5.9 5.6 5.7 5.8 6.2 1960-March June Sept. Dec. 8.50 9.50 9.50 8.50 3.75 3.75 L.50 a.50 3.25 3.25 U.00 3.50 6.3 6.U 6.2 5.9 196l-March June Sept. 8.00 7.50 7.50 k.25 L.00 L.00 3.25 2.75 2.75 5.8 Time Nov, 7.50 3.5o 2.75 — a / Approved c r e d i t s on c u r r e n t account. 3-mo. Treasury b i l l s Forward U.S. $ Comm. bank Market Share yields —~ Yield gap __ __ —— —— * — - - 3.29 — 3.22 2.66 2.33 2.19 ' 2 oh 3.0 3.5 U.o 6.U 6.6 6.5 6.2 2.27 1.86 1.80 1.96 U.i U.7 U.7 5.5 5.9 5.9 5-6 6.0 5.9 6.0 2.11 2.19 2.63 2.1:2 . h«2 3.7 3.U 3 ok 3.6 INTEREST A R B I T R A G E , UNITED STATES / ilhurtdoy CA N A D A ligurn T H R E E - M O N T H T R E A S U R Y BILL R A T E S CAKADA V v I V v / u RATE D I F F E R E N T I A L A N D SPREAD IN FORWARD FAVOR A z ~~ UNITED STATES CANADIAN T DOLLAR OF CANADA + A"l\ f.s. 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 NET I N C E N T I V E IN F A V O R J_.L. D 1959 OF C A N A D A + -1-L M 1960 1961 1162 INTEREST A R B I T R A G E , N E W Y O R K / L O N D O N 11 9 3-MONTH TREASURY BILL RATES EU60 RATE DIFFERENTIAL - 3 - M O N T H AND FORWARD DOLLAR | ST PR L I N G SPREAD RATE DIFFERENTIAL " F O R W A R D RATE-LONDON IN F A V O R O F LONDON WITH EXCHANGE COVER IN FAVOR OF NEW YORK INTEREST ARBITRAGE 3-MONTH FOR TREASURY „ EURO-DOLLAR GERMAN BILLS, DEPOSIT COMMERCIAL INTERBANK BANKS L E N D I N G .RATE AND RATES ... E U R O - D O l l A R - RATE DIFFERENTIAL AND FORWARD DEUTSCHE MARK /Vrv-~Y RATE D I F F E R E N T I A L _ N t I WITH INCENTIVE: r-\ INTERBANK FORWARD IN F A V O R LOAN I960 EXCHANGE Of COVER FRANKFURT ( + ) RATF 1961 1962 INTEREST A R B I T R A G E , F R A N K F U R T / L O N D O N " 3 - M O N T H TREASURY INTERBANK LENDING BILLS AND RATES \ A GERMAN I N T E R B A N l P f • J J V y V - v LOAN RATE / i RATE DIFFERENTIAL A N D | - 3 - M O N T H FORWARD STERLING S P R E A D IN F A V O R OF UNITED KINGDOM BIllS \ [ ^ RATE DIFFERENTIAL" WITH OVERl J FORWARD GERMAN INTERBANK EXCHANGE COVER V— — W / 1960 1961 19 6 2 S H O R T - T E R M INTEREST R A T E S * IOHDOH I" I \ -1 CANADA t- 1111 1 1. i L.! .1.1. 1958 3 m o n t h t r e a s u r y bill r o l b i lor all c o u n i r i f i e x c e p t J a p a n ( j m o n t h i n t e r b a n k d e v o u t rote) a n d S w i t z e r l a n d 3 m o n t h r o t d lor U S d o l l a r d e p o v i i i in L o n d o n (3 m o n t h d e p o s i t r a t e ) . L O N G - T E R M B O N D YIELDS 1958 1959 1960 1961 1962 INDUSTRIAL Hole: Jopon STOCK INDICES* lode* of oil ttocki traded on Tokyo e x c h a n g e 6 S P O T E X C H A N G E RATES - M A J O R CURRENCIES A G A I N S T U.S. DOLLAR Abov e par Abov• \llji par ~ 3-MONTH AGAINST FORWARD U L S, EXCHANGE RATES DOLLARS PREMIUM +| AGAINST f - AGAINST P O U N D SWISS STERLING - L O N D O N FRANC POUND STERLING FRENCH - L O N D O N FRANC A DISCOUNT-; I y \ , n
@FedFRASER