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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 I N A N C E
BOARD OF GOVERNOR#
H. 13
No. 19 7
May 26, 1965
CAPITAL MARKET DEVELOPMENTS ABROAD
I,
II.
III,
:
I.
Germany;
Germany
Nine Charts on Financial Markets Abroad
Latest Figures Plotted in K. 13 Chart Series
Money and Capital Markets, November 1964 to May 1965
The continued tightening of the liquidity situation in German financial
markets since early 1964 culminated on May 5 in heavy sales of outstanding bonds
and the establishment of a 7 per cent effective yield on long-term bonds of
Federal government agencies.
Table 1.
Selected Financial InUcators a January 1964-May 1965-1/
s ,rs indicated;
Bond yields
5-1/2% Railroad Bonds
(1958-83) (%p.a.)
FAZ: 6% Public Auth. loans
(% p. a, )
Rates for Call money in
Frankfurt
(monthly midpoint, % p, a/)
Credit institutions borrowing
at Bundesbank
(DM billions)
Stock price index
FAZ index (12/31/58=100)
1/
1965
Mar.
Apr.
Jan,
June
1964
Sept.
Dec.
5.92
6,35
b,
5
6 39
6.-+2
6.57
6. 71
6.81
5.91
6.73
6.42
6.43
6. 52
6. 68
6. 70
7. 11
2.63
3. 19
3.69
2.50
4.13
4.19
4.31
1,4
2.8
4„ 3
3.4
4.0
4.6
3.4
4. 7
198
194
202
194
196
182
182
179
J
May 14
End of month figures except where indicated.
Throughout 1965; yields have been rising steadily. Between the end of
January and May 14, yields on 6 per cent bonds of public authorities rose from
6,52 to 7=11 per cent and the rate for call money rose from 2.50 to 4.31 per cent.
(See Table 1,) Bond yields have since advanced further.
The tightening of domestic liquidity has been produced by the restrictive policies of the Bundesbank and by the cessation of the inflow of foreign
funds. Since the second half of 1964, the borrowings of the credit institutions
from the Bundesbank have r.yid around DM 4 billion. (See Table 1.)
At the same time, the continued German business expansion and concurrent
increases in financing requirements have placed increasing demands upon the
German capital market. The inauguratic-n of the American balance of payments
program has added further to the strain; German firms have sought credi ts in
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^Decontrolled after 6 months)
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-
2-
Germany to replace loans from United States banks; at the same time, foreign
subsidiaries of U.S. firms, which had previously been supplied with funds by
the parent company, have been seeking financing in European centers,
Tightening credit conditions contributed to a shake-out in the German
bond market in early May. With reduced liquidity, private holders made sales
of outstanding government bonds and the public authorities actively supported
bond prices in order to hold yields within the 6 per cent range. Authorities
further found it necessary to shorten the maturities and reduce the is sue price
of new flotations. In this situation, the policy of supporting all issues of
the same coupon at the same market price, regardless of maturity, merely provided an added incentive for investors to sell outstanding securities and purchase new issues. At the same time, the commercial banks. continuing their
standard practice, sold old issues of bonds in order to make large purchases
of new offerings and thereby profit from the bonus granted large-block purchasers.
Furthermore, the mortgage banks were selling government bonds in order to improve
their liquidity position. Finally, yields being offered in the direct placement
market (that is, securities placed directly by a broker with a financial institution outside the established capital market) were attractive erough to induce
private investors to sell government bonds.
On May 5, sales of public authority bonds became quite heavy and the Bundesbank, in consultation with Government and Public Authorities, decided tc
give up support operations. The price for 6 per cent government issues fell
from 96 to 94-1/4 in two days of trading; on May 7 the Bundesbank announced the
reduction in the price of the new Bundesbahn issue from 96 to 94-1/2 and a refund
of the 1-1/2 per cent difference to those who had bought at 96 per cent,
This decision meant that the public authorities had decided it was no
longer possible to maintain a coupon rate in the 6 per cent range, The authorities
had been trying to maintain the coupon against persistent market pressure ever
since the proposal of the 25 per cent tax on bond yields to non-residents in
March 1964.
According to press reports, yields on outstanding bonds have risen
above 7 per cent to a level of 7.11 per cent. The Central Bank Council has just
approved a forthcoming issue of the ] : ! Rheinland-Pfalz which will introduce a
7 per cent coupon on the market next/ week.
Monetary authorities reaffirm credit-tightening policies
After the bond market disturbance on May 5, German authorities reaffirmed the measures which had been taken to contrc. the expansion of domestic
liquidity and disappointed hopes that restrictive measures would be relaxed in
response to the situation on the capital market.
On January 22, the Bundesbank raised the discount rate from 3 to 3-1/2
per cent. At the same time, the Bundesbank increased the rate for advances
against securities from 4 to 4-1/2 per cent and raised the selling rates of
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- 3 -
open-market paper between 1/2 to 3/4 of one per cent. Since the beginning of
March, however, rates on day-to-day money have been substantially above the
discount rate. This fact, together with the upward movement in long-term
yields and the continued business expansion, have created the expectation
that short-term rates may again be raised shortly. According to the press,
German banking circles expect the Bundesbank either to raise discount rate
again, perhaps to the 4 per cent level, or to change the regulations
governing deposit rates so as to further raise these rates (which had been
advanced on March 1.)
The German press has compared the present situation to conditions
prevailing in 1960 when long-term bond yields were last at 7 per cent. At
that time, however, discount rate was at 5 per cent and yields on savings
deposits were 4 per cent, compared to the current 3.5 per cent level. During
1960, the tightening of German credit availabilities at a time of strong
business advance produced large differentials in interest rates between
Germany and other countries, particularly the United States, and helped to
set off large-scale capital inflows into Germany: these inflows finally
culminated in the appreciation of the D-mark in March 1961. However,
Dr. Benning, director of the Bundesbank, has stated that the current international liquidity situation is not one that would give rise to a similar
course of developments._&/
Long-term lending rates rise to 7 per cent on the bond market
After weeks of mounting pressure on interest rates, authorities in
Germany gave up their attempts to restrain the upward movement of long-term
rates. In the first week of May, an interest level of 7 per cent was
established in the bond market.
There had been a very substantial tightening of credit conditions in
Germany over the past months as a result of an actively restrictive central
bank policy and the virtual equilibrium of the balance of payments in the
second half of 1964. As a consequence of the tightening credit situation,
bond prices, which had stabilized towards the end of 1964, began to weaken
again in January and yields on 6 per cent public authority bonds advanced
persistently from 6.43 per cent in December to 6.52 per cent at the end of
January and to 6.70 per cent by the end of April. Market pressure continued
to build up and public authorities found themselves forced in March to reduce
the support price for their bonds from 98 per cent of par to 96 per cent.
Pressure continued to mount, however, and on May 5 the Bundesbank, as
agent of the public authorites, withdrew its support of bond prices in the
face of massive sales of outstanding public authority bonds of longer
maturity. At that point, yields
from about 6. 7 per c?nt to 7.1 per
cent, and have since drifted higher.
1/
Frankfurter Allgemeine Zeitung, May 12, 1965, p. 24.
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- 4 -
The immediate causes of the heavy bond sales of May 5 were rather
technical. The decision of the public authorities to support all bonds of
identical coupon at the same price, regardless of the length of maturity,
had created a situation in which higher yields were to be realized from the
bonds of shorter maturity. Holders of public authority bonds of longer
maturities traded them in increasingly larger quantities in favor of the
shorter-term bonds. This situation moreover was compounded by the commercial
banks' practice of selling off outstanding bond issues in order to finance
the purchase of large blocks of new offerings and thus profit from the bonus
given in the form of a deduction from the issue price to large takers of
new issues.
The underlying source of the market's weakness, however, was the
tightening credit situation, which led, among other things, to a movement of
private funds out of the government securities market and into the private
placements market where especially attractive rates were obtainable. In
addition, the mortgage banks sold long-term government bonds in volume in
order to acquire funds for loans.
The situation came to a head on May 5 <'r " bank sales of securities
in anticipation of the new Bundesbahn issue, in combination with accumulated
offerings from other investors, resulted in passive sales. At that point,
the Government yielded to the pressure and allowed the interest rate to find
its own level. Prices on Government bonds fell from 96 to 94-1/2 per cent
of par. The Government later made good the difference to investors who had
purchased the new Bundesbahn issue at 96 per cent before the market broke.
The 7 per cent interest rate appears to be firmly established. Yields
on public authority bonds stabilized at a level of 7.11 per cent in the third
week of May and all new issues are now expected to carry a 7 per cent coupon.
It is further expected that public authorities will now adopt a more flexible
price support policy, with support prices differing according to the
maturities.
Hopes that the restrictive credit policy would be eased because of
the capital market situation were disappointed by the Bundesbank's announcement
that the maintenance of internal stability took precedence over lower
capital market rates and that it would therefore continue to pursue its
policies as before. The Cabinet publicly endorsed Bundesbank policy following
its meeting on May 10.
As a result of the increase in long-term lending rates, short-term
interest rates are also expected to rise further. The Bundesbank is soon
expected to take steps to close the gap between capital market yields and
money market rates. Thus the financial press has been expecting the
Bundesbank shortly to raise the discount rate from 3-1/2 per cent to 4 per cent,
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thereby automatically raising deposit and lending rates; as an alternative,
interest rates could be raised through a revision of the interest rate
regulations, leaving the discount rate at its current level. Market
sources advance the opinion that some step must be taken soon to maintain
order in the credit and capital markets.
Following the bond market upset, a pause in new issues was declared-the second so far this year--and a number of planned public authority loans
were postponed. Furthermore, the government announced its intention of
curtailing its planned volume of borrowing during the rest of the year. It
is doubtful, however, that these measures can materially relax market
tensions: a deferment of new issues now could mean that the market will be hit
even harder later in the year with accumulated financing needs. It must
further be borne i- mind that the y - A . - : 'ties have received little net new
cash from the DM 850 million floated on the bond market so far this year
since a large part of the funds so acquired were exhausted in supporting the
price of outstanding issues. The financing needs of the public authorities
presents a ticklish problem: if requirements cannot oe satisfied on Lhe capital
market, either cash balances would have to be drawn down or a ^ a u c e s taken up from the
central bank. Either of these steps would add to inflationary pressures.
^
Table 2.
Germany:
Gross Placements in Securities Markets 1964-February 1965
(millions of DM, month or monthly average)
1963
IV
I
117
424
20
172
70
495
46
316
195
325
177
138
39
300
52
347
55
315
20
144
147
782
24
328
11
149
511
733
927
835
738
534
1281
671
672
959
668
544
661
1004
804
Total gross bond placements 3/ 1405
1886
1503
1282
1195
2285
1475
116
145
225
245
133
108
448
15L:
2031
1728
1527
1328
2393
1923
"Occasional" borrowers bonds:
Industrial
Public authorities
Foreign issuers
Other bonds_2/
Total
Mortgage and communal bonds
Gross share placements
Total security placements
at issue value
II
1964
III
_1 / Market value.
2/ Mostly bonds of specialized credit institutions.
_3/ Includes medium-term notes (Kassenobligationen).
Source: Deutsche Bundesbank Monthly Report.
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IV
1965
Jan. Feb.
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-
6
-
Stock market remains weak
Despite bright business prospects and favorable company statements
for the year 1964, the stock market has remained weak in the period under
review. Share prices continued the indecisive downward drift which began in
September 1964. The FAZ general stock index fell 6.2 per cent between the
end of December and the beginning of May. Political considerations--domestic
and international--appear to be among the factors which have affected the
stock market adversely. Market weakness has further been accentuated by
substantial foreign sales since March. These have reportedly come largely
from U.S. interests, perhaps in response to the U.S. balance of payments
program.
It is quite probable that the increasingly attractive yields on
the bond market may deflect funds from the stock market, causing it to
weaken further.
The public sale of shares in the government-owned Vereinigte
Elektrizitaets und Bergwerks, A.G. (VEBA) is expected to begin May 24. The
government will offer about DM 788 million of nominal capital stock of the
company to lower income groups as part of its promotion of~ property formation
by this economic group.
German money market increasingly under effects of credit tightening measures
The tightness of the credit situation in Germany was reflected
also in the level of rates on the money market. Increasingly tighter credit
conditions were experienced on the money market from November to April as
the Bundesbank continued to limit the rate of credit expansion. Only during
December and January were there periods of temporary ease.
After the rise in discount rate from 3 to 3-1/2 per cent at the
end of January, rates gradually tightened during February. By March and
April, rates for day-to-day money ranged between 4-4-3/8 per cent, or
between 0.5 to 1.0 per cent above the new discount rate. Rates for
three-month money were as high as 4-5/8 per cent by the end of April.
(See
Table 3.) There was no easing in the rates for either call or three-months
money in the first half of May.
The earlier ease in the money market during January was the
combined result of seasonal factors and heavy borrowing by the commercial
banks at the Bundesbank in anticipation of an increase in the discount rate.
Following the increases in the discount and other short-term interest rates
on January 22, conditions in the money market eased somewhat further, due to
a temporary discontinuation in the sale of open-market paper by the Bundesbank.
This action increased the incentives for the placement of funds abroad by the
banks. Observers also speculated that the action was taken, in part, to "punish"
the banks for the heavy anticipatory borrowing prior to January 22. In the
last week of January, day-to-day money fell to a range of 1-1/2-2 per cent and
no takers of funds were reported on several days.
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Table 3.
Germany:
1/
Money Market Rates in Frankfurt October 1964-April 1965
Day-to-day money
October
November
December
- 7 -
1-23
24-31
2-1/2
2-1/2
3
2-1/4
1-7
8-15
16-23
24-31
February 1-7
8-15
16-23
24-31
March
1-7
8-15
16-23
24-31
April
1-7
8-15
16-23
24-30
3-1/8
2-7/8
2
1-1/2
3-1/4
2-7/8
3-1/8
3-3/4
4
3-3/4
4
4
4-1/8
4-1/8
4-1/4
4
January
-
4
3-3/4
3-1/2
5-1/2
3-3/8
3-1/8
3
2
3-3/8
3-1/4
4-1/4
4-1/4
4-1/4
4-1/8
4-3/8
4-1/4
4-1/4
4-1/4
4-3/8
4-3/8
Three-month loans
5-1/4
5-3/8
5-1/8
-
3-7/8
4
-
3-3/4
3-7/8
3-3/4
4
4-1/8
4
-
-
4-1/4
-
4-3/8
4-1/2
4-1/2
-
-
-
-
-
5-1/2
5-5/8
5-1/2
5-1/4
3-3/4
4
4-1/8
3-3/4
4
4-1/8
4
4-1/8
4-3/8
4-1/4
4-1/4
4-5/8
4-1/2
4-1/2
4-5/8
4-5/8
1/ Highest and lowest rates quoted each week (month) by Frankfurt banks.
Source: Deutsche Bundesbank.
In a further restrictive move, the Bundesbank announced that due to
the increase in funds from capitalization available to commercial banks,
rediscount quotas would be reduced October 1, 1965 by what market sources
estimate will be an average of 25 per cent. It is expected that this
measure will not affect the large banks since they rarely avail themselves
of their rediscount privileges to the full extent possible; however, smaller
private banks with smaller liquidity margins will probably feel the pinch
to a certain extent. On the whole, therefore, the restrictive effects of
this measure are expected to be relatively moderate.
The restrictive policy of the Bundesbank was lent unexpected
support in February when President Johnson announced the U.S. balance of
payments program in which U.S. banks were asked to limit the increase in
lending to foreigners to 5 per cent for the year ending in February 1966
and major U.S. companies were asked to improve their individual balance of
payments position. The reduction of U.S. foreign bank loans which has
taken place has undoubtedly contributed to the tightening of the German
money market. There has furthermore been some speculation that U.S. firms
have withdrawn funds from foreign subsidiaries, thus forcing the foreign
branches to take their increasing financing needs to the German capital
market.
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8
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Trade balance improves in first quarter
The German trade balance improved sharply in the first quarter of
1965 thanks to a stronger performance of exports in each of the first three
months. Over the quarter as a whole, exports rose 7.0 per cent and imports
2.8 per cent. (See Table 4.) This was a reversal of the pattern experienced
throughout 1964 when the rapid economic expansion and increases in incomes
caused imports to advance more rapidly than exports and resulted in a
progressive deterioration of the trade balance. It is not likely, however,
that the recent improvement will be maintained since consumer demand remains
strong; in addition, imports usually grow more slowly in the first quarter than
in the other quarters of the year. In fact, seasonally-adjusted trade figures
show a small deficit of DM 70 million for April.
Table 4. Germany: Merchandise Trade, 1964-April 1965
(seasonally adjusted monthly or monthly average, in DM billions)
Exports
f. o.b.
I
II
III
IV
I
Jan.
Feb.
Mar.
Apr.
5.34
5.41
5.29
5.52
5.91
5.85
5. 73
6. 15
j}/5. 36
Imports
c. i, f.
4.46
4. 71
5.04
5.37
5.52
5. 68
5. 26
5. 61
£/5.43
Industrial goods
Imports
Trade
balance
3.38
3.50
3. 81
4. 14
.88
. 70
. 25
. 15
. 39
. 17
.47
.53
-.07
£/
4.44
4.16
a/
a/
&! not available
JD/ preliminary
Source: Deutsche Bundesbank
The expansion of exports follows the rapid growth of new foreign
orders in the second half of 1964. In the first two months of this year, however,
seasonally adjusted incoming foreign orders were 7.2 per cent lower than in
the November-December period and 2.5 per cent lower than the corresponding
level of one year ago.
Balance of payments
The German balance of payments for the fourth quarter of 1964
showed a surplus of DM 124 million, almost exactly offsetting the third
quarter deficit of DM 160 million. The fourth quarter surplus was produced
by a modest improvement in the goods and services account and by a large
inflow of private short-term capital, resulting from the sterling crises in
November and December as well as the seasonal window-dressing operations of
German commercial banks towards the end of the year. These inflows were
.offset in part by large official payments abroad. (See Table 5.)
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Table 5.
1.
Germany:
Goods and Services
Trade balance
Services
Total
- 9 -
Balance of Payments, 1964-February 1965
(in millions of DM)
IV
1965
Feb.
Jan.
568
-439
129
918
-14
904
132
-62
70
425
110
535
-1413
-230
16
-1627
-1163
-158
74
-1247
-1119
-464
-414
-1997
-431
-58
-289
-778
-399
-57
169
-287
I
II
2243
67
2310
1955
-68
1887
-1125
-249
-382
-1756
1964
III
2.
Official Payments
Donations
Long-term capital
Short-term capital
Total
3.
Private Capital
Long-term
Short-term 2/
Errors and omissions
Total
458
-618
940
780
-811
191
428
-192
152
46
760
958
385
1078
-246
1217
94
-379
999
714
595
-834
297
58
Surplus or Deficit (-)
1334
68
-160
124
6
306
1/ Preliminary
2/ Includes commercial bank capital other than foreign exchange assets.
Source: Basic data from Bundesbank and International Financial Statistics
rearranged by author.
In January 1965, the balance of payments was in virtual equilibrium.
In February, however, a surplus of DM 306 million was realized. This was
caused by a seasonal improvement in goods and services and by a considerable
reduction in the size of official payments. The private capital account was
largely in balance on the whole; however, sizeable movements took place in
the individual items. Large increases in February in the inflow of long-term
capital and in the outflow of short-term capital may, in part, reflect the
movement of capital both in anticipation and later in response to President
Johnson's balance of payments program which was announced during that month.
Small first quarter increase in reserves
Large shifts of foreign reserves in January, during which period
the Bundesbank lost $365 million and the commercial banks gained $397
million, was related to the unwinding of window-dressing operations by
commercial banks. The export of funds by commercial banks was encouraged
in January by the temporary excess of domestic short-term liquidity and
by the halt in the sale of open market paper by the Bundesbank.
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-
10
-
Commercial banks' foreign exchange assets declined by a total of
$220 million in February and March, however, as banks repatriated funds to ease
their liquidity positions and prepare for the major mid-March tax date. These
movements were reflected in the $254 million increase in Bundesbank reserves
during February and March, As a result of these largely offsetting movements,
total German reserves rose only $49 million in the first quarter. Bundesbank
reserves declined $36 million in April and commercial banks reportedly reduced
their balances abroad by $15 million.
Table 6.
Germany: Changes in Reserve Position
(in millions of U.S. dollars)
1964
Dec.
III
Bundesbank gold and
foreign exchange
Gold
Foreign exchange
Total
405
-534
-129
68
-167
- 99
B=
Drawing rights on IMF
360
Cc
Commercial banks
foreign exchange
118
Total A through C
349
A.
1965
IV
I
Jan.
Feb.
Mar.
Apr-
- 36
- 36
99
-189
- 90
11
-106
- 95
2
-367
-365
1
97
98
8
164
"156
214
- 33
- 40
4
11
a/
41
- 86
177
397
- 24
-196
a/
- 58
38
70
- 29
--
4 9 - 8
-
a/ Not available.
Source: IMF, International Financial Statistics: Bundesbank, Monthly Report.
The movement of the German balance of payments towards equilibrium in
the second half of 1964 was reflected in the stability of official foreign exchange reserves, if drawing rights on the IMF are included. Bundesbank gold and
foreign exchange reserves declined by $189 million during this period but this
decline was offset by an increase of $214 million in IMF drawing rights during
the last quarter. Commercial bank foreign exchange reserves had declined
slightly by the end of the second half of the year, however the usual inflow of
commercial bank reserves at the end of the year due to window-dressing and other
seasonal needs was eased by the Bundesbank's offer of credits to commercial banks
at reduced rates between December 10 and 31. With commercial bank holding of
foreign exchange also changing little on the whole during the second half of 1964,
the total reserve position of the central and commercial banks declined by $20
million during the period.
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Rate for DM weakens slightly in April and May
The foreign exchange rate on the D-Mark sagged considerably in late
April and early May, perhaps in response to a large efflux of funds as foreign
workers and German vacationers streamed into Italy and France during the spring
holidays. The rate moved down from 25.146 cents in mid-April to 25.110 cents
in mid-May. Prior to that, the rates had reflected a relatively good demand
for DM, particularly as commercial banks found it necessary to bring back funds
from abroad in the second half of February and in March i% order to shore up
their liquidity positions. As a consequence, the rate reached a high of 25.160
cents at the beginning of April. In January, on the other hand, the reexporting
of funds by the banks following year-end window dressing operations caused the
rate to slide to a low of 25.135 cents at the end of that month. The premium
for three month forward DM moved rather much in accord with developments on the
spot market, widening as the quotation on the DM rose and falling as the rates
weakened.
Table 7.
(in U. S. cents per DM and per cent p. a.)
Par value
Upper limit
Lower limit
Spot 1/
Rate
1964
1965
Nov. 13
27
Dec. 1
11
31
Jan. 4
15
29
25.143
25,151
25.132
25.143
25.144
25.134
25.136
25.135
25.00
25.188
24.875
40.3%
Forward 2/
Rate
Spot
Rate
Forward
Rate
1965
+0.3%
+0.47=
+0.47=
+0.67=
+0 . 77=
+0. 97.
+0.87=
Feb.
1
11
26
Mar. 1
12
26
Apr. 2
15
30
May
7
14
25.129
25.130
25.156
25.155
25.146
25.151
25.160
25.146
25.132
25.122
25.110
+0.87=
40. 77=
+0. 37=
40. 27=
40 . 77=
40.97=
a/ 40. 77=
40.67=
40.57=
40.57=
40.67=
a/ April 5.
1/ Noon buying rates.
2/ Rate for three month forward DM.
Source: Federal Reserve Board.
II.
Chart
Chart
Chart
Chart
Chart
Chart
Chart
Chart
Chart
1
2
3
4
5
6
7
8
9
-
Nine Charts- on Financial Markets Abroad
International Money Market Yields for U.S. Dollar Investors
Interest Arbitrage, United States/Canada
Interest Arbitrage, New York/London
Interest Arbitrage for German Commercial Banks
Short-term Interest Rates
Long-term Bond Yields
Industrial Stock Indices
Spot Exchange Rates - Major Currencies Against U.S. Dollar
3-Month Forward Exchange Rates
OFFICIAL USE ONLY
Table 8.
Germany?
3-mo. Eurodollar deposits
London
Selected Money Market Yields and Exchange Rates
(per cent per annum)
3-BIO. inter- Spread
in favor
bank loans
London
Frankfurt
3=mo« U.S. $
into Marks
Comm.
Market
bank
3—mo* Treas. bills
U.K.
Ger.
U.S.
2.63
2,63
3.79
3. 80
3, 12
3. 12
3. 12
3. 12
3. 12
3,12
3. 12
3. 12
3. 12
3.12
3.12
3.12
3.12
3. 12
3.12
3c 12
3.81
3.83
3.89
3,89
3.94
3.97
3.93
3. 91
3. 90
3.86
3.91
3.90
3, 91
3.92
3.87
3,88
Nov. 27
Dec. 31
5.00
4,62
5.44
5. 25
-0.44
-0.63
+0. 25
+0. 25
+0 o 3
+0= 6
6. 41
6.41
Jan, 22
29
Feb. 5
12
19
26
Mar. 5
12
19
26
Apr. 2
9
16
23
May
7
14
4.44
4,50
4. 50
4. 50
4,56
4,56
4. 75
5. 00
4.88
4.88
4. 75
4. 75
4,82
4. 75
4.81
4,88
4,26
3. 75
3.88
4.00
3.88
4,06
4,25
4. 12
4,25
4,44
4,50
4.44
4. 56
4,56
n, a.
n. a.
+0. 38
+0. 75
+0. 62
+0.50
+0. 68
+0. 50
+0. 50
+0,88
+0. 6 3
+0.44
+0.25
+0.31
+0.26
+0, 19
n, a.
n. a.
+0.25
+0.25
+0. 25
+0,25
+0= 25
+0,25
+0, 25
+0.25
+0;25
+0. 25
+0. 25
+0.25
+0. 25
+0.25
+0.25
+0, 25
+0. 8
+0. 8
+0. 7
+0. 7
+0. 4
+0, 2
+0 c 3
+0, 7
+0.8
+0, 8
+0.8
+0 o 7
+0. 6
+0. 3
+C.6
+0. 6
6.41
6.38
6.32
6.32
6,32
6.29
6,26
6.20
6.35
6.35
6.35
6.32
6.29
6.26
6.13
6.13
Table 9.
Comm.
bank
loans 1/
6-12 mo. deposits
4/ 8.00
8.00
8.00
8.00
n. a.
Time
3„ 50
3.50
3.50
3. 50
3.50
3.50
3.50
3.50
3,50
3.50
3,50
2.75
2.75
2.75
2.75
2.75
2.75
2.75
2.75
2.75
2.75
2.75
3.50
3.50
3.50
3,50
n. a.
2.75
2C 75
3.00
3.00
rnl
°?
7. 50
7. 50
7.50
7.50
7.50
7.50
7. 50
7.50
7.50
7.50
7.50
Savings
Bond yields
5-1/255
Public
Railway author-
1
January
February
March
April
May 14
Selected Loan, Deposit and Security Rates
(per cent per annum}
8
February
March
April
May
June
July
August
September
October
November
December
Germanys
Share
Yields
Yield
gap
5.80
5.88
6.09
6.23
60 36
6.35
6.33
6.34
6.39
6.38
6.39
5.9
6.0
6. 2
6.3
6.3
6.3
6. 3
6.4
6.4
6, 4
6.4
2.93
2.83
2.88
2.98
3.03
2.96
2.90
2.93
3.08
3, 11
3.08
3.0
3.2
3.3
3.3
3.3
3. 3
3,4
3.5
3.3
3.3
3.3
6.42
6,48
6,57
6, 71
6,81
6.4
6.5
6.5
n. a.
n. a.
3.09
3.20
3.28
n. a;
n. a.
3.3
3.3
3. 2
17 Approved credits on current account.
2/ Beginning on March 20, 1964, commercial banks are prohibited from making
interest payments on new foreign owned time deposits,
3/ Monthly averages of end-of-week figures.
4/ Effective January 22.
for FRASER
Digitized
INTERNATIONAL MONEY
M A R K E T YIELDS 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 VS. C E R T I F I C A T E OF D E P O S I T
|
EURO-DOLLAR
OVER
|
SELECTED I N T E R N A T I O N A L M O N E Y RATES
Friday
figures
CAHAP1AHJJLMAHCE
COMPANY
|
EURO-DOLLAR
DEPOSIT
RATES
U . K . HIRE PURCHASE
]
|
(LONDON)
I N T E R E S T A R B I T R A G E , U N I T E D STATES / C A N A D A
MO N T H T R EAS URVJl ILL RATES
I B 1 L L R A T E D I F F E R E N T I A L AND
F O R W A R D C A N A DJ A _ N L _ D Q L L A R
3 - M O N T H C O V E R E D RATE DIFFERENTIALS 'NET INCENTIVES)-
K
INTEREST A R B I T R A G E , N I W Y O R K / L O N D O N
Frldoy
11 fl u n i
3 - M O N T H
TREASURY
BILL RATES
U . K . IQCAL A U T H O H I V H F O S I T S
10NP0N
m w YOU
I
RATE
DIFFERENTIAL
1
A N D
3 - M O N T H
F O R W ' A R D "S T T R U N c l
S F I I A 0 IN FAVOI OF TOMDON
RAT
DIFFERENTIAL
WITH
F O R W A R D
mi
i
!
E X C H A N G E
COVER
(NET
INCENTIVE)
T
V
5
Chort
4
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 DEPOSIT RATES-]
1
p
V
V'
GERMAN INTERBANK
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
DISCOUNT
:
T M S U R Y BILLS
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 )
Wl
IN F A V O R O f 1 0 N D 0 N E U R O - D O l l A R S
1965
n
C h o f >
5
SHORT-TERM
INTEREST
V.
R A T E S *
-VI
I U I 0 - D 0 U A I - LONDON
U.K.
|
P ^ '
CANADA
SWITZIIIAND
44°j 3 m o n th Ireoiury bill role« for oil countriei except Japan.
and Switzerland (3 month deposit role)
"}" 3-month role for U S dollar depoiili in London.
(Average rale on bonk loom and ditcounti)
Ck«n t
L O N G - T E R M B O N D YIELDS
-
Mil
/—
I N D U S T R I A L STOCK INDICES
letle stele
200,
Swiss Bonk Corporation industrial stock.
Ch«ft 8
SPOT
EXCHANGE
RATES
-
M A J O R
CURRENCIES
AGAINST
SWISS FRANC
G E R M A N MARK
U . K . STERLING
FRENCH FRANC
DUTCH GUILDER
1
I
C A N A D I A N DOLLAR
J A P A N E S E YEN
i I ! i 1 1
{
U.S.
DOLLAR
3 - M O N T H F O R W A R D E X C H A N G E RATES
A G A I N S T U.S. DOLLARS
GERMAN
MARK
SWISS FRANC
AGAINST
POUND STERLING - LONDON
MARK
A
SWISS FRANC
A G A I N S T POUND STERLING - L O N D O N
GUILDER
\ j/
FRENCH FRANC
H. 13
No. 197
May 26, 1965
III.
Latest Figures Plotted In H. 13 Chart Series, 1965
Per cent
per annum
Chart 1
Upper panel
(Wednesday, May 19
Chart 5
(Friday, May 21
,
except as noted)
)
Euro-$ deposit
4.88
U.S. certif. of deposit
4.32
Treasury bills;
Lower panels
(Friday, May 21
Euro-dollar:
)
Call
7-day
30-day
90-day
180-day
Finance Co. paper:
4.31
4.44
4.69
4.94
5.19
U.S.
4.25
Canada
4.88
Hire-purchase paper, U.K.
U.S.
3. 88
U. K.
6. 10
Germany
3. 12
Canada
3. 76
Swiss 3-month deposits
(Date: April 15 )
-L15
Euro-$ deposit (London)
4. 94
Japan: composite rate
(Date; Dec. 31
)
7.990
Chart 6
5.24
Bonds:
Chart 2
(Friday, May 21
Treasury bills:
)
Canada
3.76
U. S.
3.88
Spread favor Canada
-0.12
Forward Canadian dollar
+0.27
Net incentive (Canada +)
+0.15
Chart 3
(Friday, May 21
Treasury bills:
Per cent
per annum
)
U.K.
6.10
U.S.
3.88
Spread favor U.K.
U.S. govt,
(Wed. , May 19
4.17
U.K. war loan
(Thurs., May 20
6.63
German Fed. Railway
(Fri. , May 21
6.81
Swiss Confederation
(Fri. , May 14
3.91
Canadian govt.
(Wed. , May 12
5.07
Netherlands government
perpetual
(Friday, May 7)
(Friday, May 14)
5.05
5.08
+2. 22
Forward pound
-1.82
Net incentive (U.K. +)
+0.40
For description and sources of data see special annex to H. 13 Number 164,
September 23, 1964.
@FedFRASER