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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 B O A R D OF G O V E R N O R # F E D E R A L RESERVE SYSTEM H. 13 3o. 213 September 15, 1965 CAPITAL MARKET DEVELOPMENTS ABROAD To I!. ™::™r 1„ Germany; Germany Nine Charts on Financial Markets Abroad Latest Figures Plotted ir H. 13 Chart Series, 1965 Money and Capital Markets, July-August 1965 Money a.-. 3 capital markets ir. Germany remained under great strain during July ar.d August, In :ly. a flood of new bond issues caused prices of outstanding bends to fall, fields on public authority bonds rose 31 basis points during the first three weeks of July, resulting in a further widening of the substantial gap between long and short-term interest rates. (See Table 1= Table 1„ Germany; Selected Interest Rates (in per cent per annum) a/ 1965 1964 Dec, Call money b/ 90-day money b/ Yield on 6% public authority bonds Discount rate a/ b/ Ma:rch May June July 27 Aug. 13 Sept. 3 2,87 5.39 4 =07 4«, 31 3.44 4.63 4.44 4.88 4,38 5.13 3. 75 5.25 4. 63 5. 38 6.43 3.0 6. 68 3„ 5 7.21 3.5 7.31 3.5 7.61 3.5 7.48 4.0 7.61 4.0 End of period unless indicated, Monthly midpoint. This widening interest-rate differential, and concern over inflationary price pressures, led :he Bundesbank to reconsider its earlier reluctance to change the discount rate. On August 13, the discount rate was raised from 3-1/2 to 4 per cent and the rare for advances against securities from 4-1/2 to 5 per cent. At the same rime the Bundesbank announced that, effective October 1, rediscount quotas of banks would be reduced by 12-1/2 per cent instead of 25 per cent, as previously announced. OFFICIAL USE ONLY Decontrolled after six months) OFFICIAL USE ONLY - 2 - From the beginning of July to the 27th, the average yield on 6 per cent public authority bonds jumped from 7.32 to 7.61 per cent. On July 28, in an attempt to halt further deterioration on the bond market, the Cabinet declared a general freeze on all new bond issues and summoned representatives of the major borrowers to Bonn to discuss measures to reduce heavy capital financing demands of the public authorities. The August capital market meetings were ir cc-21. sive bat discussions will apparently continue in the search for an agreed-upo- solution. The freeze on -ew issues was lifted at the beginning of September. However 5 the almcst immediate announcement of a D M 260 million Federal Railways loan to be floated in September confirmed market fears that the licensing freeze and the discissions had not brought about any change in the public authorities' act i: ie regarding borrowing. When bond sales caused yields to rise again, the. .^apical Market Committee postponed the Railways issue indefinitely, they also announced that, with one small exception, no new issues were scheduled to come to the market before the beginning of October„ Subsequently, the Laender governments moved to draw up a comprehens i v e framework within wnich to fit their collective financing demands and, reportedly, the major German cities decided to postpone further financing demands for the time being, These actions would seem to indicate that the public authorities have realized the necessity of some cooperative effort, in their own interests, to tailor their aggregate financing needs to more reasonable prcportiers. Congestion in bond market prompts new issue freeze. In July, the German bond market was flooded by an unexpected volume of financing demands. The nominal value of gross placements of fixed interest bearing securities totaled D M 1911 million - this represents the largest volume of issues brought to the German bond market in any single month, with the exception of seasonally high January placements of the past few years. (See Table 2.)J/ The massive sale of new issues caused prices of outstanding issues to fall and the price of some outstanding 6 per cenc government bonds dropped below 90 for the first time. ConsequentLy, yields on public authority bonds rose from 7.32 per cent at the beg:/: m r g of July to 7.61 per cent by the 27th of the month. The space of new issues in July was the result of a sudden surge of pent-up financing requirements, As the volume of new issues rose and the market weakened, fears Vnat it would be impossible to hold the 7 per cent coupon rate led to a further rush of new issues in anticipation of a further rise in interest rates, V: icn seemed particularly plausible in view of the fact that municipalities had been offering to pay almost 8 per cent for 4-year promissory notes ,-rhul.dsheire). 1/ The figures in the cext are not comparable with those in Table 2, which represent market values while the former are available only on a nominal basis. Comparison of the two, nnwevsr, does provide an indication of the approximate difference in magnitudes. OFFICIAL USE ONLY Table 2. - 3 - Germany; Gross Placements in Securities Markets 1964-June 1965-^ (millions of DM, month or monthly average) 1964 "Occasional" borrowers bonds: Industrial Public authorities Foreign issuers Other bonds 2/ Total Mortgage and communal bonds 1965 I II III IV I II May June 70 495 46 316 195 325 177 138 39 300 52 347 55 315 20 144 86 303 193 333 90 380 43 181 364 163 187 270 342 26 148 927 835 738 534 915 694 654 786 661 853 570 418 613 959 668 544 Total gross bond placements _3/ 1886 1503 1282 1195 1768 1264 1072 1399 145 225 245 133 239 349 431 502 2031 1728 1527 1328 2007 1613 1053 1901 Gross share placements Total security placements at issue value 1/ Market value. 2/ Mostly bonds of specialized credit institutions. 3/ Includes medium-term notes (Kassenobligationen). Source: Deutsche Bundesbank. On July 28, in order to halt the further deterioration of the market, the Cabinet declared a general freeze on the licensing of all new issues and called a meeting of the major capital market borrowers to consider measures to control the heavy borrowing demands of the public authorities. The Government based its action--the legality of which has been questioned--upon Paragraph 795 of the Civil Code, which states that the Government may take preventive action when the ability of the capital market to function is endangered. The market settled following the announcement of the issue freeze, and toward the end of August yields on 6 per cent public authority bonds moved down to 7.46 per cent. However, the market remained uneasy and generally skeptical that the discussions would succeed in limiting the financing demands of the public authorities, particularly in view of the fact that the Cabinet had earlier approved all of the additional expenditure bills passed at the end of the Parliamentary session. Representatives of the Federal Government, the Laender, municipalities and credit institutions met twice during August to discuss measures to coordinate the timing, volume and conditions of loans of public borrowers. The Government rejected a proposal by the credit institutions for an across-theboard percentage cut in approvals for license applications filed since the introduction of the freeze; instead, the authorities favored a case by case review as a more equitable and more effective way of limiting total financing demand. OFFICIAL USE ONLY OFFICIAL USE ONLY - 4 - The August meetings were inconclusive, but the Federal Government did announce that it would substantially reduce the amount of its planned borrowings for the remainder of 1965 and the Laender and municipalities expressed their willingness to cooperate. As an initial step, the Government of the Land North Rhine Westphalia ordered its municipalities to refrain from taking up loans of any type on which the interest exceeded 7. 6 per cent. In the absence of a similar directive on the part of other Laender governments, however, this action would merely exclude the municipalities of this one Land from the capital market. The freeze on new issues was lifted at the beginning of September. However, the immediate announcement of a DM 260 million Federal Railways loan produced a further fall ir. bend prices and yields on public authority bonds moved up from 7,46 per cent on August 23 to 7.63 per cent on September 2. The Capital Market Committee thereupon announced the indefinite postponement of the Railways issue and stated further that, with the exception of one small DM 40 million loan, no new issues would be offered before the beginning of October. At this writing, it appears that the public authorities have realized the seriousness of the situation on the capital market and the necessity of come cooperative effort to limit demands. The Laender as well as the Railway Authority were originally expected to float sizable new issues, but the Laender have now agreed to try to coordinate their financing requirements, and discussions to this end are to continue. In addition, the major German cities, have recently announced the postponement, for the time being, of plans for raising new funds in 1966. Authorities move to realign short and long-term interest rates. The rise of long-term bond yields to 7.6 per cent at the end of July resulted in a further widening of the substantial gap between long and short-term interest rates in Germany, even though short-term rates had already risen considerably above the level of the discount rate, to which they are legally tied. Rates for call money had remained above the discount rate ever since March, at times by as much as 1 - 1 / 8 per cent and market circles had expected a discount rate increase. designed to narrow the gap between short and long-term rates, ever since May, when the 7 per cent coupon was established on the German bond market. At that time, tr.e Bundesbank rejected a discount rate increase on the grounds that the general economic situation did not require further tightening of credit policies. However, when market pressures forced bond yields to 7.6 per cent at the end of July, the Bundesbank accepted the necessity of an adjustment designed to bring long and short-term rates into better alignment. On August 13, the Bundesbank raised discount rate from 3-1/2 to 4 per cent, and its rate on advances against securities from 4-1/2 to 5 per OFFICIAL USE ONLY CIAL USE ONLY - 5 - cent; selling rates of the Bundesbank for money-market paper were also adjusted accordingly, thus raising the rate on 3-month Treasury bills from 3.12 to 3.88 per cent. At the same time, the Bundesbank announced that on October 1, the rediscount quotas of credit institutions at the Bundesbank would be reduced by only 12-1/2 per cent instead of the full 25 per cent originally announced. Evidently, this move reflected public relations rather than monetary policy considerations. It is unlikely that reduction of rediscount quotas by 25 per cent would have resulted in much further tightening, since most banks have substantial rediscount margins which they have never used. The total rediscounting facility of credit institutions with the Bundesbank is estimated between D M 10-15 billion; the highest amount that the credit institutions have so far found it necessary to discount has totaled only D M 5.9 billion. However, a full 25 per cent cut in rediscount quotas in addition to the higher discount rate would have further strained relations between the Bundesbank and the credit institutions. The reduced cut-back in rediscount quotas was evidently designed to convince the credit institutions that the object of the Bundesbank's restrictive measures is to control the inflationary actions of the public authorities rather than to curb the banks' activities. Following the Bundesbank's action, commercial banks immediately raised their short-term lending rates by the full amount of the discount rate increase. The maximum rate for money loans now stands at 8.5 per cent; the rate for the discount of paper eligible for rediscounting at the Bundesbank is now 7 per cent, and 8.5 per cent for discount of other bills. Furthermore, the Federal Supervisory Office and the credit institutions represented in the Central Loans Committee have agreed on increases in deposit rates of interest. Effective October 1, the key rate for savings deposits with a maturity of less than 12 months will be raised from 3-1/2 to 3-3/4 per cent and the rate for deposits subject to notice of 12 months to 2-1/2 years will be raised from 4-1/2 to 5 per cent; interest rates are not regulated on deposits with a maturity of more than 2-1/2 years. Money market continues tight. In July and August, German money markets also reflected continued tight liquidity conditions. The rate for three-month loans moved up from a weekly average of 4. 94 per cent at the end of June to 5.13 per cent at the end of July; in August the rate advanced further to 5.25 per cent. (See Table 3.) The easing of rates for day-to-day money in the period under review was largely the result of technical factors. The decline in the first part of July occurred in reaction to the passing of the strain connected with midyear payments. Rates continued to ease as banks replenished their cash position by repatriating $127 million of their foreign exchange assets in OFFICIAL USE ONLY OFFICIAL USE ONLY - 6 July. Furthermore, banks' total borrowing at the Bundesbank rose from DM 5.2 billion in June to DM 5.7 billion in July and rose somewhat further , in the first week of August as banks hedged against the possibility of a discount rate increase. Accordingly, rates for day-to-day money fell from an average of 4.55 per cent in the first week of July to 3.50 per cent by the last week in August. In the first few days of September, however, call money rates tightened sharply as banks began preparations for the major mid-September tax date. Tab be 3. Germany: 1/ Money Market Rates in Frankfurt, January-August 1965—' (in per cent per annum) 1/ Day-to-day money— 2.44 3.50 4. 12 4. 19 3.44 4.44 3.94 3.94 4. 31 4. 50 4. 63 4.88 1 8 16 24 4. 55 4.41 4. 30 4.08 5.06 5.06 5.06 5. 13 1 8 16 24 4. 19 3L 69 3.91 3. 50 5. 25 5.19 5. 38 5.25 1965 - January February March April May June Week of: July Aug. Three-month loans 1/ Midpoint of the rates quoted each week (month) by Frankfurt banks except in the case of weekly quotations for day-to-day money which represent averages of daily quotations. Source: Deutsche Bundesbank. Stock market remains uncertain. Despite a favorable business outlook and a current high level of economic activity, the German stock market continued to move uncertainly, largely in sympathy with the uncertainty on the bond market. After declining throughout June, the market firmed during July and registered small gains in August. At the end of August, the FAZ general stock index stood about 2 points above the end of July level but 8.5 per cent below its level at the beginning of the year. OFFICIAL USE ONLY - - OFFICIAL USE ONLY 7 - German foreign trade continued to expand. Germany's foreign trade continued to expand in June and July along the same lines as it has for more than a year, with import growth exceeding export expansion. In June-July exports rose by 2.4 per cent over April-May to a level 5.7 per cent over that of a year ago; but imports rose by 3.1 per cent over April-May and were 17.3 per cent above June-July 1964. (See Table 4.) On a seasonally adjusted basis, Germany's trade surplus was reduced from D M 22 million in April-May to D M 13 million in June-July. Table 4. Germany; Merchandise Trade (seasonally adjusted month or monthly average, in D M billions) Exports f. o. b. 1964 - I II III IV I II April May June July * 1965 - £/ Trade balance Imports c.i.f. 5.34 5.41 5.29 5.52 4. 46 4. 71 5.04 5.37 5.91 5. 76 5.36 6. 14 5. 77 6.01 5.52 5. 72 5.43 5.85 5.87 5. 78 £/ .88 . 70 . 25 . 15 £/ .39 .04 -.07 .29 -.10 .23 £/ Preliminary. Source: Deutsche Bundesbank. Balance of payments continues in deficit. The German balance of payments registered another deficit in June, owing largely to the continued deterioration of the trade balance. (See Table 5.) In fact, on a balance of payments basis, the trade balance swung from a surplus of D M 258 million in May to a deficit of D M 309 million in June, the first time since 1958 that Germany has registered a deficit in its trade account. Despite a modest improvement in the services account, the deficit on goods and services widened by D M 91 million to D M 419 million, while official payments totalled DM 616 million. The combined deficit was offset only in part by an inflow of unrecorded private capital totaling D M 737 million, and Germany's overall balance of payments deficit in June amounted to D M 450 million. OFFICIAL USE ONLY OFFICIAL USE ONLY Table 5. 8 - Germany: Balance of Payments 1964-June 1965 (in millions of DM) Jan.-June 1964 1965 1. Goods & Services Trade balance Services Total 2. Official Payments Donations 1/ Long-term capital Short-term capital Total 3. Private Capital Long-term capital Short-term capital 2/ Errors & omissions Total Surplus or Deficit - (-) 1965 I II May June 4362 127 1049 - 658 1096 53 - 47 - 711 258 -586 -309 -110 4489 391 1149 - 758 -328 -419 -2616 - 479 - 380 -3102 - 511 18 -1357 - 174 68 -1745 - 337 50 -382 - 80 - 89 -449 -131 - 36 -3475 -3595 -1463 -2132 -551 - 616 - 296 859 371 488 360 - 59 721 1111 274 2383 273 1107 1 1276 9 - 25 - 93 737 1536 3516 1751 1765 326 585 2550 312 1437 -1125 -553 -450 a/ Preliminary. If Also includes foreign workers' remittances. 2! Includes commercial bank capital exclusive of net foreign exchange holdings. Source: Deutsche Bundesbank and International Financial Statistics; data rearranged by author. Preliminary balance of payments figures for the month of July suggest an adjusted deficit in the neighborhood of D M 870 million. This overall result combines a deficit of D M 178 million on goods and services, (a merchandise surplus of D M 122 million and a deficit of D M 300 million for services), net outflows of D M 623 million of long-term capital and donations totaling DM 4 0 4 million, which were partially offset by an inflow of D M 334 million of short-term capital. OFFICIAL USE ONLY OFFICIAL USE ONLY - 9 - The balance of payments results of the first six months of this year present a dramatic contrast to those of the same period of 1964, as reflected in the reduction of the overall deficit from DM 2,550 to only D M 312 million. (See Table 5.) In large part, the change is the result of a tremendous surge in imports which has cut the trade surplus of this year to one-quarter of its January-June 1964 level, but growing deficits on travel have contributed to the shrinking payments surplus. On the other hand, measures to discourage capital inflow have kept net imports of capital from reversing or offsetting this tendency to any important extent. Foreign financing arrangements of German firms explain a substantial part of the private capital inflows which have taken place. Decline in foreign exchange reserves continues. The balance of payments deficit was reflected by declines in German reserves totalling $323 million in June and July, of which the larger part, $221 million, took place in July. (See Table 6.) However, the July reduction in the Bundesbank's foreign exchange reserves was caused largely by the transfer of $116 million of its reserves to the category of non-freely useable assets following Germany's movement of foreign exchange funds from U.S. to U.K. Treasury bills. In effect, the purchase of U.K. Treasury bills represented a prepayment in connection with Germany's agreement with the U.K. to share the cost of the British Rhine forces. If this transaction were excluded from reserve movements, Bundesbank reserves would have risen by $13 million; since commercial bank foreign exchange reserves declined $129 million in July, this would have produced a total reserve decline of only $105 million after adjustment for Germany's IMF position. A substantial reserve decline of $152 million in Bundesbank reserves during August indicates a balance of payments deficit for that month. As a result of foreign exchange losses and the continuing balance of payments deficit, the exchange rate for the D M declined in the last half of July and August; the rate moved from 24.963 U.S. cents in mid-July to 24.931 cents by the end of the month and declined further to 24.919 cents by the end of August. (See Table 7.) OFFICIAL USE ONLY OFFICIAL USE ONLY Table 6. - 10 - Germany: Changes in Reserve Position, 1964-August 1965 (in millions of U.S. dollars) 1964 JulyJan. Dec. June A. Bundesbank gold & foreign exchange Gold Foreign exchange 1965 June 11 Aug. 238 -178 167 -356 -106 134 -602 - 93 5 -103 68 - 84 60 -189 - 95 -468 - 93 - 98 -152 B. Drawing rights on IMF 147 214 - 33 180 C. Commercial banks net foreign exchange 164 - 87 517 - Total A through C 371 - 62 389 -289 Total -129 1 -102 -221 n.a. Not available. Source: IMF, International Financial Statistics; Bundesbank, Monthly Report. Table 7. Germany: Exchange Rate for the DM, January-September 1965 (in U.S. cents per DM and per cent p.a.) 25.00 25.188 24.8 75 Par value Upper limit Lower limit Spot rate 1/ January February March April May June July August 25.135 25.137 25.144 25.149 25.097 25.003 24.961 24.923 Forward "2/ rate +0.817= +0.52% +0.65% 40. 72% July 16 +0.66% 40.57% 40.42% +0.29% 2 9 Aug. 23 30 6 13 20 Sept. 27 3 10 1/ Noon buying rates. 2/ Rate for three month forward DM. Source: Federal Reserve Board. OFFICIAL USE ONLY Spot rate Forward rate 24. 975 24.976 24.963 24.939 24.931 24.932 24.928 24.931 24.919 24.915 24.926 +0.50% 40.50% 40.45% 40.32% +0.31% +0.33% +0.28% +0.30% 40.25% 40.10% +0.15% - 11 . Table -8. Germany! 29 26 26 23 28 11 18 25 July 2 9 16 23 30 Aug. 6 13 20 27 - Jan. Feb. Mar. Apr. May June 3-mo,, Buro3-mo. inter- Spread dollar deposits bank loans in favor London Frankfurt London -0.44 5.44 5,,00 -0.63 5.25 4,,62 4,,50 A,,56 4,,88 4,,75 5. 25 5.00 5,,00 4.,88 4.,88 4. 88 4.,75 4. 56 4. 62 4. 75 4. 63 4. 50 4. 44 Table 9. Germany* Comm. bank loans 1/ 1964 - June July August September October November December 1965 - January February March April May July August 1™7 T/ interest 3/ 4/ 5/ 3.75 4.06 4.44 4.56 4.50 4.88 4.82 4.94 5.06 5.06 5.06 5.06 5.03 5.25 5.19 5.38 5.25 40. 75 40.50 40.44 40.19 40. 75 40.12 40.18 -0.06 -0.18 -0.18 -0.31 -0.50 -0.41 -0.50 -0.56 -0.88 -0.81 3-mo. U.S. $ into Marks Conn. Market 40,,27 40,.25 40,,63 40,.25 40,,25 40.,25 40.,25 40.,25 40.,25 40. 25 40.,25 40.,25 40. 25 40.,25 40. 25 40. 25 +0. 25 40. 25 40. 25 40. 25 40. 25 3-mo. Treas. bills U.K. 40.,80 40.,25 40.,85 40.,32 40. 69 40. 64 40. 50 40. 52 40. 50 40. 50 40. 45 40. 32 40. 31 40. 33 40. 28 40. 30 40. 25 II - Nov. 27 Dec. 31 Selected Money Market Yield a and Exchange Rate* (per cent per annum) 2.,63 2.,63 3.79 3.80 6.38 6.29 6. 35 6.26 6.20 5.42 5.42 5.39 5.36 5.42 5.46 5.46 5.46 5.46 5.36 5.36 5.39 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 3.88 3.88 3.88 3.83 3.97 3.86 3.92 3.85 3. 79 3. 77 3.74 3.80 3.84 3.82 3. 79 3.78 3.82 3.81 3.81 3.83 Selected loan. Deposit and Seourity Rates (per cent per annum) Bond yields 5-1/2% Public Railway authorTims 2/ 1958-63 3yiUes Share Yields Yield gap 6°12 mo. deposits Savings 7.50 7.50 7.50 7.50 7.50 7.50 7.50 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 6.36 6.35 6.33 6.34 6.39 6.38 6.39 6.3 6.3 6.3 6.4 6.4 6.4 6.4 3.03 2.96 2.90 2.93 3.08 3.11 3.08 3.3 3.3 3.4 3.5 3.3 3.3 3.3 4/ 8.00 8.00 8.00 8.00 8.00 8.00 8.00 5/ 8.50 3.50 3.50 3. 5Q 3.50 3.50 3.50 3.50 3.50 2.75 2. 75 3.00 3.00 3.00 3.00 3.00 3.00 6.42 6.48 6.57 6. 71 6.82 6.89 6.95 7.08 6.4 6.5 6.5 6.6 6.9 7.1 3.09 3.20 3.28 3.34 3.48 3.71 3.3 3.3 3.2 3.3 3.4 3.4 n.a. n.a. n. a. Approved credits on current account. Beginning on March 20, 1964, commercial banks are prohibited from making payments on new foreign owned time deposits. Monthly averages of end-of-week figures. Effective January 22. Effective August 13. U.S. 6.41 6.41 Chiii 1 INTERNATIONAL 3 - M O N T H EURO Wednesday figurei MONEY MARKET YIELDS DOLLAR DEPOSIT VS. FOR U.S. CERTIFICATE DOLLAR OF INVESTORS DEPOSIT Jk U.S. CERTIFICATE OF DEPOSIT | SELECTED I N T E R N A T I O N A L Friday figure! MONEY EURO-DOLLAR OVER | RATES E U R O - D O L L A R DEPOSIT RATES ( L O N D O N ) 1943 m « •'*$ c? INTEREST ARBITRAGE, Friday figures* 3 - MONTH BIL 3 RATE - MONTH UNITED TREASURY Pi BILL DIFFERENTIAL COVERED Thursday figure* 1962, Friday I hereafter STATES / C A N A D A RATES AND RATE FORWARD CANADIAN DIFFERENTIALS (NET DOLLAR INCENTIVES)- I INTERES GE, NEW Y O R K / L O N D O N Friday I i g 3 - M O N T H TREASURY BILL R A T E S RATE DIFFERENTIAL A N D FORWARD 3-MONTH STERLING' RATE D I F F E R E N T I A L WITH FORWARD EXCHANGE IN FAVOI OF NIW Y O U COVER (NET INCENTIVE) INTEREST ARBITRAGE FOR G E R M A N C O M M E R C I A L B A N K S Friday figur** j | 3 - M O N T H | | TREASURY EURO-DOLLAR | BILLS, DEPOSIT I INTERBANK l | LENDING RATE AND RATES_j_ EURO-DOLLAR LONDON GERMAN TREASURY BILLS i RATE I l DIFFERENTIAL I AND I I FORWARD r DEUTSCHE MARK SPREAD IN FAVOR OF FRANKFURT INTERBANK 10AN RATE FORWARD RATE l/'\ DISCOUNT RATE DIFFERENTIAL WITH I r ~7> v a / A FORWARD | . EXCHANGE IN FAVOR OF FRANKFURT I A INTERBANK LOAN RATE V \ .„. COVER A Y — 1 ^ - ^ | v--/-j''— TREASURY BILLS IN FAVOR OF LONDON EURO DOLLARS I II I II I v/ Y v ,„/ N ' I (NET , I I I I J I INCENTIVE) I U ',1A. SHORT-TERM INTEREST R A T E S * | 3 month I and Switzerland (3-month deposit r dollor deposits i CANADA \\ L O N G - T E R M BOND YIELDS \ /' J / I N D U S T R I A L STOCK INDICES l e r i e stele 350 300 250 i Bonk Corporation industrial stock. n: inde* oF 22 5 industrial and other stocks traded on the Tokyo enchonge. SPOT 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 SWISS FRANC GERMAN MARK U.K. STERLING 1 1 I \ 1 1 FRENCH FRANC r V \ / T \ I I ! * BELGIAN fRANC A / < : - \ a - - Vi DUTCH GUILDER 1 1 1 1 / v w 1 1 \ I I 1 1 ITALIAN LIRA CANADIAN DOLLAR JArANISI YIN 1 1 1 1 I I 1 1 i i 1 1 1 1 1 1 3 - M O N T H F O R W A R D E X C H A N G E RATES Friday f i 0 u r 11 A G A I N S T U.S. DOLLARS A G A I N S T POUND STERLING - L O N D O N A G A I N S T POUND STERLING - L O N D O N P H. 13 No. 213 September 15, 1965 III. Latest Figures Plotted In H. 13 Chart Series, 1965 Per cent per annum Chart 1 Upper panel (Friday, Sept. 10 , except as noted) (Wednesday, Sept. 8 ) Treasury Euro-$ deposit 4. 44 U.S. certif. of deposit 4. 33 Lower panels (Friday, Sept. 10 ) Euro-dollar deposits: Finance Co. paper: Call 7- day 30-day 90-day 180-day 4.00 4. 12 4.25 4. 44 4.88 U.S. Canada Hire-purchase paper, U.K. a 5? bills: U.S. 3.87 U.K. 5.36 Germany 3.88 Canada 4.03 Swiss 3-month deposits (Datet Aug. 15 ) 3,69 Euro-$ deposit 4.44 (London) Japan: composite rate (Date: Apr. 30 ) 7. 921 Chart 6 4.60 Bonds: Chart 2 Treasury bills; U.S. govt. (Wed., Sept. 8 ) (Friday, Sept. 10 Canada 4.03 U. S. i. R7 Spread favor Canada +p, 1 6 Forward Canadian dollar -o. 54 Net incentive (Canada + ) -p. 38 Chart 3 (Friday, Sept. 10 Treasury bills: ) U.K. 5.36 1.87 Forward pound ) U.K. war loan (Thurs., Sept. 9 4.28 > # 8 German Fed. Govt. Bond (Fri. , Sept. 10 ) 7.41 Swiss Confederation (Fri. , Aug. 27 ) 3.93 Canadian govt. (Wed. , Sept. 8 ) 5. 32 ) 5.23 Netherlands government perpetual U.S. Spread favor U.K. Net incentive Per cent per annum Chart 5 (Fri. , Sept. 3 Sept.—10 5.21 i. -2.09 (U.K. + ) For description and sources September 23, 1964. -0.60 of data see special annex to H. 13 Number 164,
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