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D I V I S I O N OF I N T E R N A T I O N A L . F 1 N A N C E
H. 13
\
'
No. 187
India:
BOARD OF OOVERNOKS
March 17, 1965.
CAPITAL MARKET DEVELOPMENTS ABROAD
I.
II.
III.
I.
-v T
India
"
Nine Charts on Financial Markets Abroad
Latest Figures Plotted in H. 13 Chart Series
Money and Capital Markets--Fourth Quarter 1964 and First Quarter 1965
On February 17, 1965, the Indian authorities took new restrictive steps
to deal with mounting price pressures and with balance of payments difficulties.
They announced:
1.
2.
3.
4.
5.
6.
7.
8.
an increase from 5 to 6 per cent in the bank rate;
an increase from 28 to 30 per cent in the net liquidity ratio below which
bank borrowings from the Reserve Bank become subject to penalty rates;
an increase from 0 to 10 per cent in the maximum lending rate for larger
banks;
higher time and savings deposit rates and a widening of the spread between
rates on time deposits of more and of less than 90 days;
higher interest rates paid or charged by the government and other official
institutions;
a 10 per cent ad valorem duty on most imports;
a reduction of government import commitments requiring the use of free
foreign exchange; and
a reduction in future import quotas.
According to the Finance Minister, these measures were prompted by an
acute contra-seasonal shortage of foreign exchange, holdings of which have declined
30 per cent since the beginning of the current fiscal year last April 1. Although
gold and foreign exchange reserves were $427 million on February 19, 1965, 8 per
cent lower than a year earlier, they would have fallen below the legal minimum of
$420 million, if, in January and February, the government had not transferred to
the Reserve Bank $34 million of hitherto unreported gold.
These steps reinforce a series of restrictive monetary and credit
measures taken by the Indian authorities during the past year. A series of
measures were taken on September 25, 1964, at a time when the bank rate was
raised from 4.5 to 5 per cent; the authorities (a) introduced a system of penalty
discount rates tied to the banks' liquidity ratio; (b) abolished most special
quotas permitting borrowing at the bank rate; (c) imposed a maximum lending rate
for large banks; and (d) increased the maximum rates on time deposits of more
than 90 days, while lowering those on time deposits of less than 90 days.
In spite of this, wholesale prices failed to decline seasonally in
the fourth quarter and began to move up again in early February, when they were
14 per cent higher than a year ago. In the four months from October to January,
bank loans increased almost as much as during the same period a year ago.
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(Decontrolled after 6 months)
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Beginning in November, the banks sold large amounts of government securities
and in December and January they borrowed heavily from the Reserve Bank which
stood ready to lend to them freely at the bank rate so long as this did not
reduce their net liquidity ratio below 28 per cent. By February 12, the aggregate net liquidity ratio, which was about 40 per cent in October, had declined
to 32 per cent. Since this figure is still above the level to which the legal
liquidity ratio has just been raised, bank borrowings from the Reserve Bank
will continue for some time to be available at the bank rate. Moreover, the
banks appear to have about twice as much money out on call or at short notice
as at this time last year; in addition, the call money rate has been below
bank rate throughout January and most of the first half of February. These
two facts suggest that there is still a considerable amount of excess liquidity
in the system.
Balance of payments pressures have increased to pay for the import
of additional foodgrains to meet a food shortage, for rising defense requirements, and for a larger external debt service. Exports seem to have been
increasing more slowly than imports. In addition, recent increases in exports
have not been reflected fully in foreign exchange receipts. An increasing
proportion of exports has been to countries with which India has large bilateral
agreement debts and which therefore settle with India in rupees. There also
seems to have been a slowdown in the conversion of export earnings into rupees
because of rising interest rates abroad. In October, the authorities tightened
exchange allocations, but the pressures have continued.
Newspaper reports indicate that the authorities have asked three
western petroleum distributing companies to purchase a part of their requirements from the Soviet Union which accepts payment in rupees, and that they are
attempting to persuade foreign companies to postpone repatriation of profits.
In announcing the new measures, the Finance Minister said that India
must maintain the "utmost fiscal and monetary discipline for a number of years."
He added that export promotion policies would now take precedence over domestic
consumption and investment. He also stated that members of the Indian Consortium
would be requested at the mid-March Paris meeting to increase the proportion of
non-project (i.e., balance of payments) aid to finance imports of raw materials
and semi-finished goods for industry and to provide "immediate relief" from
the current foreign exchange shortage, apparently hinting that India may seek
postponement of external debt payments.
Since the full effect of all these measures would not be felt for
some time, the Finance Minister announced that India will request the "maximum
possible" standby credit from the IMF to meet immediate foreign exchange
requirements.
Initial reaction of Indian bankers was that the higher bank rate
and related steps were partially window dressing in support of the request
for an IMF standby and for increased Consortium aid. The bankers expect to
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raise their prime rate from 7 to 8 per cent, but demand for funds comes from
industry where earnings are rising. The Bombay stock market fell following
the announcement of the measures.
Money market. The day-to-day inter-bank money rate in Bombay eased
in October and early November but then turned up sharply as seasonal demand
for funds increased. (See Table 1). In December, it exceeded the level of
bank rate, but fell back to an average of 4.64 per cent in January. Following
the new restrictions, it rose to 5.75 per cent on February 22.
Table 1.
Quarterly averages:
I
II
III
IV
a/
b/
India:
Inter-Bank Call Money Rate in Bombay — ^
(in per cent per annum)
1963
1964
5.64
4.46
2.01
2.93
5.67
5.01
2.31
2.90 2 /
Monthly averages:
July
August
September
October
November
December
January
1963-64
1.35
2.10
2.58
2.35
2.01
4.43
4.('6
1964-65
1.60
2.37
2.95
1.53 ^
2.03 2 '
5.13
4.64 i?/
Average of Fridays, weighted by deposits.
Provisional.
The average rate of discount for auction sales of Treasury bills,
declined throughout the third quarter but firmed up somewhat in the fourth
quarter. (See Table 2). The reduction in the interest rate on deposits of 46
to 90 days from 3.5 to 2.5 per cent o n October 1 may have helped to keep the
Treasury bill rate from rising more in the fourth quarter.
The total amount of Treasury bills outstanding at the end of December
was 9 per cent higher than at the end of 1963. Gross sales of Treasury bills
to the public in the second half of 1964 totalled Rs. 2.167 billion about 45
per cent more than in the second half of 1963. The usual decline in such sales
in the fourth quarter was not as pronounced as in previous years. This enabled
the Reserve Bank to make a modest reduction in its holdings in the second half
of 1964. Net Reserve Bank claims on government at the end of December were
Rs. 1.75 billion or 6.6 per cent higher than a year earlier.
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Table 2.
India:
Treasury Bills and Reserve Bank Claims 011 Government
(in billions of rupees)
Average Rate of Discount for Auction
Sales in Per Cent
Per Annum
1963
III
IV
1964
I
II
III
IV
July
August
September
October
November
December
a/
b/
c/
_d/
-4-
2.32
2.31
2.38
3.00
2.45
2.45 d/
2.57
2.40
2.39
2.45
2.47 ~ ^
Total OutGross Sales
standing
To
at end of
To
Public Reserve Bk.
Period
.853
.646
.315
.581
1.120
1.047 H
.507
.330
.283
.544.368 ^,
.138 d/
Total Reserve
Bank Claims on
Gov't, (net) at
end of period j?/—'
12 .25
13 .19
13.00
13.81
24.82
26.33
13 .54
14 .89
14 .12
d/
14,.00
13.82
15.71
14.86
15.05 d/
26.97
28.63
26.86
28.08
8,.13
3.,15
2.,84
8.,15
3. 21
d/
2.63
15.63
15.46
14.86
15.27
15.36
15.05 d/
27.89
27.30
26.87
27.10
27.17
28.08
Includes intermediate Treasury Bills,
Includes Central and State Government claims.
Claims on government net of deposits.
Provisional or partial.
Banking developments. The highly liquid condition of the banks following a less than seasonal decline in bank credit played a large part in the
decision of the Reserve Bank to adopt restrictive measures in late September.
However, the subsequent seasonal expansion in bank credit has so far almost
equalled that of the current harvest season. (See Table 3).
In the slack season, from May to October, deposits rose Rs. 2,146
million largely reflecting a reflow of currency (Rs. 1,1390 million) to the
banks. At the same time bank credit contracted by Rs. 1,372 million. The banks
used part of the additional liquidity to repay Rs. 434 million of their borrowings from the Reserve Bank and to acquire Rs. 2,588 million of government securities. Their cash balances and reserves rose by Rs. 110 million.
In November, as seasonal credit demand began to appear, the banks began
to reduce their holdings of government securities. In December, bank credit increased sharply, rising as much as in December 1963, and deposits decreased. To
meet these demands, the banks sold more government securities, drew down cash
balances, and borrowed a record amount from the Reserve Bank. These trends
continued in January.
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The system of penalty discount rates introduced in September appears
to have paved the way for the December-January credit expansion. Up to September, banks could count on borrowing 50 per cent of legal reserves at the bank
rate of 4.5 per cent, an additional 50 per cent at 6 per cent and further funds
at 6 per cent at the discretion of the Reserve Bank. Under the new system,
banks can borrow at the bank rate if the borrowing does not reduce their liquidity ratio below a prescribed level. For each percentage point that their liquidity ratio falls below this level, they must pay an additional 0.50 per cent on
their total indebtedness to the Reserve Bank. Since, in October, the aggregate
net liquidity ratio of banks, at 40 per cent, was well above the 28 per cent
level below which the penalty discount rates would become applicable, the new
policy left ample room for credit expansion. The aggregate net liquidity ratio
of banks had fallen to 32 per cent by February 12. With the legal ratio now at
30 per cent, Reserve Bank credit will continue to be available at the bank rate
for some time.
Table 3.
India:
Scheduled Banks - Changes in Deposits, Borrowings from
Reserve Bank and Principal Assets
(in millions of rupees)
Holdings
Borrowings Cash & BalPer Cent Bank Per Cent of Gov't. Per Cent
from
ances with
Deposits Change Credit Change Securities Change Reserve Bk. Reserve Bk.
1963
III
IV
+
+
725
402
3.4
1.8
773
+1 ,284
- 5.0
8.8
+1 ,272
708
-
19.5
- 9.1
+
+
7
62
1964
I
II
III
IV
+ 291
+1 ,000
+1,375
+
29
1.3
4.4
5.8
0.1
+2 ,342
418
699
+ 1;,069
14.8
- 2.7
- 3.9
+ 6.3
698
+ 153
+1 ,599
500
-
- 9.8
2.4
24.4
- 6.1
+
745
814
3
348
- 2.5
0.4
- 1.0
0.2
0.4
5.7
+1 ;,063
4- 423
+ 112
+ 588
344
744
-
16.2
5.6
1.4
7.2
- 3.9
- 8.9
+
+
+
8
1
10
3
1
344
4.3
211
- 2.8
+
196
Month - 1964
+
July
+
Augus t
September
+
+
October
+
November
December
-
565
500
310
125
33
129
2.4
2.1
1.2
0.5
0.1
- 0.5
+
+
+
448
76
176
26
66
977
1965
January
361
1.4
+
781
+
-
-
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-
+
+
-
-
+
+
+
-
266
90
62
158
25
8
-
60
47
82
78
208
137
+
23
-
+
-
+
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Deposit rates. To attract more deposits to the banks, and thereby
help to hold down bank borrowing from the Reserve Bank, the rates on time
deposits of more than 90 days were raised on October 1, while the rates on
deposits of 90 days and less were sharply reduced to discourage short-term
deposits. The deposit rates which had ranged from 3 to 6 per cent, thereafter
ranged from no interest on deposits up to 14 days to 6.50 per cent on those of
more than 9 years. On February 17, the rates for deposits of more than 90 days
were raised 1 percentage point each. Since rates on deposits of less than 90
days were increased 0.25 and 0.50 percentage points, the spread between rates
on deposits of more and of less than 90 days was increased further. The rate
on savings deposits was increased from 3 to 4 per cent.
Table 4.
Period of Deposit
3 to 30 days
31 to 60 days
61 to 90 days
91 to 210 days
7 to 12 months
1 to 2 years
2 to 3 years
3 to 4 years
4 to 5 years
5 to 6 years
6 to 7 years
7 yrs. & over
_!/
India:
Change in Structure of Interest Rates on Time Deposits
(in per cent per annum)
Rates before 1 /
Aug. 17, 1964
3 .00
3 .25
3 .50
3 .75
3 .75
4 .00
4 .25
4 .25
4 .50
5;.00
5..00
5,.00
Rate Change on —^
Aug. 17 , 1964
3.00
3.25
3.50
3.75
4.00
4.25
4.50
4.75
5.00
5.50
5.75
6.00
Rate Change — ^
on Oct. 1, 1964
1 to 14 days
15 to 45 days
46 to 90 days
91 to 180 days
6 to 12 months
1 to 2 years
2 to 3 years
3 to 5 years
5 to 7 years
7 to 9 years
9 yrs & over
0 .00
1 .25
2 .50
4,.00
4,.50
5,.00
5.,25
5. 50
6. 00
6. 25
6. 50
Rate Change — ^
on Feb. 17
0.00
1.50
3.00
5.00
5.50
6.00
6.25
6.50
7.00
7.25
7.50
Rates apply to
with deposits of Rs. 500 million or more or <
category I
Category II banks with deposits of Rs. 250 to 500 million may pay 0.125 per cent
more than each of the above rates, and category III banks, with deposits from Rs.
100 million to 250 million, may pay 0.25 per cent more than each of the rates.
Central Government Bonds. The gross yield of long-term central government securities, which moved narrowly around 4.72 per cent in the third quarter,
rose to 4.84 per cent in the fourth quarter reflecting the October increase in
interest rates. (See Table 5).
Table 5.
I
II
III
IV
India:
Yield on Long-Term Government Securities
3 per cent 1986 or later
(in per cent per annum - period averages)
1961
1962
1963
1964
4.04
4.10
4,13
4.18
4.23
4.23
4.34
4.65
4.75
4.73
4.66
4.57
4.68
4.73
4.72
4.84-2
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TABLE 5.
(Cont.)
1964
July
August
September
_a/
1965
4.70
4.73
4.72
October
November
December
4.77
4.84
4.84
January
February 12
4.84
4.84
Provisional.
State bonds. In the fourth quarter, bond issues were made only by
state institutions and by entities offering state guaranteed bonds. Most issues
were for 12 years at 5 per cent.
Since December 4, banks have been allowed to count certain bonds and
debentures of local government authorities as liquid assets for purposes of
calculating their liquidity ratio. This action was taken so that changes in
bank holdings of these issues would not affect the discount rate applicable to
individual banks under the new system of borrowings tied to liquidity. Banks
had been reluctant to subscribe to the new issues of this type offered in November for fear of becoming subject to higher rates, and were inclined to reduce
their earlier holdings of similar securities to improve their liquidity position.
Stock market. The price index of variable dividend industrial securities increased 3.5 per cent in the third quarter due to favorable corporate profit
reports but lost virtually all of this gain in the fourth quarter. The index
averaged 5.8 per cent less in December than in the same month a year earlier.
(See Table 6).
On December 23, 1964, the Finance Minister introduced a limited tax
credit scheme and two minor tax exemptions to stimulate investment activity.
Market experts were disappointed not only because the measures would only affect
investment decisions of small investors in a small sector of the capital market
but also because they had expected a general tax concession for investments which
they now felt would not be forthcoming.
The sales of Unit Trust shares declined sharply after an encouraging
start between July 1 and August 15, as their price was fixed above the level
corresponding to the expected 6 per cent annual dividend rate. Unless more of
its funds are invested than on January 1, 1965, the Unit Trust may not be able
to earn 6 per cent of its total resources. On February 18, the sale price of
shares were slightly reduced for the first time.
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Table 6.
India:
Price Index of Variable Dividend Industrial Securities
(1952-53 = 100)
Quarter averages:
I
II
III
IV
1962
1963
1964
190.0
192.6
185.0
173.6
167.4
162.9
162.5
172.7
170.4
163.7
166.0 ,
163.7—
162.2
187.0
184.0
178.9
170.5
171.4
174.7
160.6
164.8
171.0
174.5
172.6
164.7
165.7
167.6
165.0
163.5 ,
162.6-^
Month averages:
July
August
September
October
November
December
a/
Provisional.
Money supply. Money supply rose 10.1 per cent in B64 compared to 13.7
per cent in the previous year. (See Table 7). Following the initial tightening
of monetary policy in early 1964, money supply decreased 3.2 per cent in the
slack season from May to September compared to 1.2 per cent in the same months
of the previous year. Following the September measures and the beginning of the
harvest season, money supply increased 4.8 per cent in the fourth quarter, less
than in the same quarter of the previous year.
The monthly annual rate of change in money supply decreased almost
steadily from a high of 14.9 per cent in January 1964 to 9.2 per cent in January
1965.
Table 7. India: Revised Money Supply with the Public
(on last Friday of the period in billions of rupees)
Quarterly Annual Rates of Change
1960-61
1961-62
1962-63 1963-64
I
II
III
IV
5.5
3.9
3.4
4.8
6.2
7.6
9.4
9.9
8.7
10.4
12.0
13.7
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13.4
13.5
10.7
10.1
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TABLE 7 (Cone.)
Month
a/
1963-64
1964-65
Monthly Annual
Rate of Change (%)
July
August
September
October
November
December
33.51
33.50
33.60
34.30
34.53
35.41
37.67—/
37.655/
37.19^/
38.102/
38.422/
38.97—'
12.4
12.4
10.7
11.1
11.3
10.1
January
35.45
39.802/
9.2
Provisional.
Wholesale prices. During the first three quarters of 1964, the
official wholesale price index rose a record 17.9 per cent compared to increases
of 8.8, 5.8 and 0.3 per cent for similar periods of 1963, 1962 and 1961, respectively. Nearly half of the rise occurred in the third quarter. While all major
price groups of the index increased, food prices increased 25.5 per cent and
industrial raw materials 22.2 per cent. Manufactured goods increased only 4.7
per cent.
At the beginning of the fourth quarter, the index began to decrease
due to marketings of the new crops, but it turned up in November and by January
exceeded the September peak. While the Indian press commented that the NovemberDecember rise was contra-seasonal the data for the past three years indicate
that the amount of the decline has been decreasing.
Local price controls and urban rationing have been established in
certain cities and regions. In addition, the Food Corporation of India has
been created to administer comprehensive foodgrain price controls and to
stock foodgrains for the coming year. These measures have been adopted to
counter price increases resulting from the widening gap between stagnant agricultural production of foodgrains in the past three years and the growing demand
associated with an accelerating population growth and increased incomes.
Consumer prices. The index of consumer prices increased a record 18.1
per cent for the year ending October 1964. This is in sharp contrast to increases
recorded in the comparable periods of the last three years which were 2.3 per
cent in 1963, 3.9 per cent in 1962 and 1.6 per cent in 1961. Since the beginning
of the third plan in April 1961, the index has increased 31.5 per cent. Money
supply has increased 31.1 per cent in the same period while national income
and population have increased 10 per cent.
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Table 8.
India:
• -10-
Index Numbers of Wholesale Prices (1952-53 = 100)
Monthly Average - 1964:
July
August
September
152.3
156.8
158.8
October
November
December
159.7
160.2
158.1
155.8
155.7
155.4
156.9
157.3
157.4
December
157.9 - /
158.7
158.0 ^a/
Selected Dates:
October
3
10
17
24
31
November 7
14
21
28
_a /
January
5
12
19
26
2
16
23
156.9
157.6
158.3
159.1
160.7
161.0
160.1
158.5
Provisional.
Gold market. Gold prices reached their seasonal peak of $81.24 per
ounce in August, declined to a low of $74.27 by October and recovered to $77.32
at the end of December, 16 per cent above a year earlier. This is almost the
same percentage increase as that of the wholesale price index.
On December 21, 1964, the Finance Minister announced that he intended
to accept certain minor amendments to the Gold Control Bill. Even with these
amendments, the bill continued to be criticized on the ground that it would not
reduce gold prices, gold smuggling or the desire to hold gold. The Minister
replied that gold prices have not risen above the $82.82 per ounce attained
in August 1962, just prior to the Chinese communist invasion, that antismuggling measures have narrowed the bullion market, and that the restrictions
on holding bullion and the attraction of income earning securities such as
the Unit Trust shares could in time reduce the desire to hold gold.
Table 9.
Quarterly Averages:
I
II
III
IV
India: Price of Gold Bullion in Bombay i*/
(U.S. dollars per fine ounce)
1961
1962
1963
1964
78 .62
78 .54
80,.01
80,,05
79 .38
80 .60
82 .06
71,.41
66 .98
72 .10
69 .98
66,,42
72.24
75.99
78.60
75.38
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Monthly Averages - 1964:
July
August
September
a/
_b/
78.06
80.88
76.86
October
November
December
75.59
74.91 — ,
75.64 —
Average of Friday spot rupee quotations in 14 carat gold per 10 grams
from August 28, 1963. Converted to U.S. dollars per fine ounce.
Provisional.
Exchange rate. The free market selling rates of Indian rupee notes
in Hong Kong and Bangkok depreciated by 15 and 11 per cent, respectively, in
1964. The rupee was at its seasonal low in the summer months. In October and
November, following the introduction of restrictive monetary policies in India
and the beginning of the harvest season, it strengthened somewhat, but weakened
again in December. Compared with the official rate of Rs. 4.7619 to one U.S.
dollar, the December rates represented a rupee depreciation of 41 per cent in
Hong Kong and 35 per cent in Bangkok.
Table 10.
India:
Hong Kong and Bangkok Free Market Selling Rates of
Indian Rupee Banknotes per U.S. dollar
Quarterly Averages:
1961
I
II
III
IV
Hong Kong —^
1962
1963
1964
1961
Bangkok —^
1963
1962
1964
5.83
6.18
7.05
6.94
6.99
7.52
7.96
7.93
6.10
6.38
6.60
6.68
6.12
6.42
6.97
6 .63
6.43
7.01
7.44
7.06
6.13
6.26
6.61
6.53
6.23
6.88
6.99
6 .6 8
5.42
5.70
6.57
6.19
Monthly Averages:
July
August
September
October
November
December
Hong Kong ±1
7.91
7.99
7.98
n. a. 2./
7.81
8.05
Bangkok
7.45
7.41 7.45
6.90
6.97
7.31
a/ Average of month.
b/ End of month.
_c / Not available.
International reserves. As of February 12, 1965, the foreign exchange
reserves were $157 million, 30 per cent lower than on April 1, 1964, the beginning
of the fiscal year. This decline brought total reserves dangerously close to the
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legal minimum currency reserve requirements of $420 million in gold and
eligible foreign exchange. Indeed, if the government had not transferred to
the Reserve Bank $22 million of hitherto unreported gold in January, and $11
million in February, the legal minimum for currency reserves would have been
violated. At the end of January legal reserves were $427 million of which
$270 million was in gold and $157 million in eligible foreign assets. In
addition, the Reserve Bank held $11 million of ineligible foreign exchange.
The law requires the Reserve Bank to hold $241.5 million in gold
and $178.5 million in gold or eligible foreign exchange„
Legislative action
would be needed to suspend the first part of the requirement but the Reserve
Bank may suspend the second part with the approval of the government.
Press
reports indicate that the government has another $32 million of unreported
gold. If eligible foreign exchange or assets decrease at the January rate,
this amount will have to be transferred to the Reserve Bank by the end of
March 1965,
Table 11,
India:
Quarter
1963
III
Month - 1964
July
August
September
October
November
December
Gold and Foreign Exchange Holdings of the Reserve Bank and
Foreign Exchange Holdings of the Government
(in millions of U,S, dollars at the end of the period)
Reserve Bank
Change
Government
451
469
110
138
513
450
452
447
130
135
74
445
448
452
444
444
447
72
67
74
77
58
438
Asia,
Africa
and L a t i n
America
Section
C'iAL l$E ONL
Change
Total
- 26
+ 28
561
607
+ 77
- 61
643
585
526
- 63
- 5
+
7
+
3
- 19
517
515
526
521
502
+
5
Change
+ 36
- 58
- 59
- 68
-
2
+ 11
- 5
- 19
Cfc«rt I
INTERNATIONAL MONEY
M A R K E T Y I E L D S FOR U.S. D O L L A R I N V E S T O R S
3 - M O N T H EURO D O L L A R D E P O S I T V S . C E R T I F I C A T E O F D E P O S I T
N E W Y O R K O F F E R RATES O N S E L E C T E D 3 - M O N T H I N V E S T M E N T S
Friday
figures
TREASURY
COMMERCIAL
IftS
BILLS-
Fully
PAPER-Fully
1964
Hedged
Hedged
1'*$
INTEREST A R B I T R A G E , U N I T E D STATES / C A N A D A
Friday figures*
3 - MONTH
TREASURY BILL RATES
jUNIIfO STATES
III I II I II II
BILL
RATE D I F F E R E N T I A L A N D
FORWARD C A N A D I A N
DOLLAR
SMEAD IN FAVOI OF CANADA
-3
- MONTH
COVERED
RATE
DIFFERENTIALS
(NET
INCENTIVES)-,-
FAVOI CANADA
FAVOR 0 . S
FAVOI CANADA
IIIASUIY
# Thursday figures 1962. Friday thereafter.
IIUS
INTEREST A R B I T R A G E , NEW
YORK/LONDON
F r i d a y J_i_g u n i
3 - M O N T H T R E A S U R Y BILL R A T E S
RATE D I F F E R E N T I A L A N D
3-MONTH
FORWARD STERLING
V
"V\
RATE D I F F E R E N T I A L W I T H
19 62
FORWARD EXCHANGE
1 963
COVER
I 964
(NET I N C E N T I V E )
196$!
INTEREST A R B I T R A G E FOR G E R M A N C O M M E R C I A L B A N K S
3 - M O N T H T R E A S U R Y B I L L S . I N T E R B A N K L E N D I N G RATE A N D
E U R O - D O L L A R D E P O S I T RATES
r
y
1
GERMAN INHR1ANK
| 1 0 A N RATI
RATE D I F F E R E N T I A L A N D
,
|
|
F O R W A R D DEUTSCHE MARK
1
j
1
1
1
1
1
RATE D I F F E R E N T I A L W I T H F O R W A R D E X C H A N G E C O V E R (NET I N C E N T I V E )
\
A INTERBANK LOAN R A T I
V
x
AJrA/N—}i
1963
1964
196$
r
SHORT-TERM INTEREST R A T E S ' *
r
I —
|
CANADA
! ; : : : i : i ! ! i 1 ! l i ! ; ; i i ! ; i.jj 1.1.1 LL i i
1962
1963
L O N G - T E R M B O N D YIELDS
i -l-k ! .. L L 1 i L LLl J 1-1 1 LiJ ..Li.i _LI l.LLLLI 1 LLLLLLL i ! L i. I. I I I. i 1 !
IS63
1964
1965
2
I N D U S T R I A L STOCK
INDICES
wsa-ioo
lefle stile
SWITZERLAND
x —
S P O T E X C H A N G E RATES - M A J O R C U R R E N C I E S A G A I N S T U . S . D O L L A R
Above pot ,
/X.
L.J
1963
1964
1965
par
Below
r
Charf_9
3 - M O N J T H F O R W A R D E X C H A N G E RATES
Friday figures
A G A I N S T U.S. DOLLARS
P., c.n. p.r annum
A G A I N S T POUND STERLING - L O N D O N
J_J I
A G A I N S T P O U N D STERLING - L O N D O N
r-
I
1163
i
. I. I .
L.-
I .J
. .I L L J .I..,
H.13
March 17, 1965
No, 187
III, Latest Figures Plotted In H.13 Chart Series, 1965
Per cent
per annum
Chart 1
Per cent
per annum
Chart 5
Upper panel
(Friday, March 12 ,
except as noted)
(Wednesday,
March 10 )
Treasury bills:
Euro-$ deposit
U 2
U.S. certif. of deposit
Lower panels
(Friday,
March 12 )
Treasury bills:
U.S.
U.K.
Canada
Finance Co. paper:
..
y
y
U.S.
U.25
Canada
(Friday,
Canada
3.63
U.S.
li2i
-0.28
Forward Canadian dollar
0.17
Net incentive (Canada +)
-0.11
Chart 3
March 12 )
Treasury bills:
6,20
Germany
3,12
Canada
3,63
3+06
Euro-$ deposit (London)
5 . 0 0
Japan: composite rate
(Date; Nov, 27 )
7,990
Chart 6
U.S. govt.
(Wed.
March 10
Spread favor Canada
(Friday,
U.K.
Bonds:
March 12 )
Treasury bills:
3*91
Swiss 3-month deposits
(Date: Feb. 1$ )
U.62
Hire-purchase paper, U.K.
(March 5)
Chart 2
U.S.
U.K.
£u2Q.
U.S.
1LZL
Spread favor U.K.
2*22.
)
iu20
U.K. war loan
(Thurs.,
March 11
M l
German Fed. Railway^
(Fri. ,
March 12
M l
Swiss Confederation
(Fri.„
March 5?
li2k
Canadian govt.
(Wed.,
March 10
&12
Netherlands government
perpetual
(Fri*,
Feb, 19
)
k.98
l7
*
Series ended»
Additional rate:
March 5
6,go
Forward pound
Net incentive (U.K. +)
-0t2i
Digitized forFor
FRASER
description and sources
September 23, 1964.
of data see special annex to H. 13 Number 164,
@FedFRASER