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DIVISION O F I N T E R N A T I O N A L F I N A N C E 1 1 c[F H. 13 No, 77 FED£ BOARD O F GOVERNOR* ~ F E D E R A L RESERVE SYSTEM September 21, 1962 o? yv;.. toSEIISLMARKET Io IIo DEVELOPMENTS ABROAD Switzerland Nine Charts on F i n a n c i a l Markets Abroad S w i t z e r l a n d ; Money and C a p i t a l Markets i n August Swiss markets experienced a r e l a t i v e l y p l a c i d August i n t h e wake of the t u r b u l e n t e v e n t s of the preceding two months • There was no r e c u r r e n c e i n August or i n t h e f i r s t two weeks of September of t h e s p e c u l a t i v e inward c a p i t a l flows which had been brought t o a h a l t by P r e s i d e n t Kennedy's remarks about t h e d o l l a r during h i s T e l s t a r news conference on J u l y 23, and Swiss o f f i c i a l r e s e r v e s underwent a nominal decline» The heavy c a p i t a l i n f l o w of June and J u l y — i n the neighborhood of $250 m i l l i o n — h a d t h e e f f e c t of p u t t i n g a c e r t a i n amount of downward p r e s s u r e on money r a t e s and government bond y i e l d s i n Swiss money and c a p i t a l markets i n August* In o t h e r m a r k e t s , s t o c k p r i c e s moved narrowly i n l i g h t t r a d i n g , and new i s s u e b u s i n e s s was a t a low l e v e l . The s p o t d o l l a r , a t SF U.32-U.325, h e l d above i t s lower l i m i t on t h e Swiss f o r e i g n exchanges, The d i s c o u n t on the 3-month forward d o l l a r moved about the 0„80 p e r c e n t p e r annum l e v e l during most of August, but widened t o 1,09 p e r c e n t p e r annum i n mid-September, reducing t o 1,69 p e r c e n t a y e a r the covered y i e l d t o Swiss i n v e s t o r s on 3-month U,S. Treasury b i l l s . On August 18 the Swiss N a t i o n a l Bank and t h e Swiss commercial banks renewed f a r s i x months t h e i r "gentlemen's agreement" t o d i s c o u r a g e t h e flow of f o r e i g n f u n d s t o S w i t z e r l a n d , Under t h e agreement, new accounts opened by f o r e i g n r e s i d e n t s w i t h Swiss banks a r e s u b j e c t t o a withdrawal n o t i c e of t h r e e months, e a r n no i n t e r e s t , and a r e s u b j e c t t o a s e r v i c e charge of l / k p e r c e n t per c a l e n d a r q u a r t e r where t h e account i s of l e s s than s i x months d u r a t i o n . The banks a l s o agree n o t t o a c t as i n t e r m e d i a r i e s i n t h e investment of f r e s h f o r e i g n f u n d s i n Swiss s e c u r i t i e s , A new f e a t u r e of t h e l a t e s t renewal i s an undertaking by the banks to take a l l p o s s i b l e s t e p s t o p r e v e n t investment of new f o r e i g n f u n d s i n Swiss r e a l e s t a t e . The "gentlemen's agreement" was f i r s t e n t e r e d i n t o i n August i960 and was renewed f o r a y e a r i n August 1961, The Swiss a u t h o r i t i e s have sought . t o hold down c a p i t a l i n f l o w s because t h e y add t o Swiss r e s e r v e a c c r u a l s and l a y a base f o r i n f l a t i o n a r y c r e d i t expansion i n S w i t z e r l a n d . Although t h e "gentlemen's agreement" has undoubtedly discouraged a c e r t a i n amount of c a p i t a l inflow* i t cannot p r e v e n t i n f l o w s of f o r e i g n f u n d s which a r e motivated by e i t h e r s a f e t y c o n s i d e r a t i o n s or s p e c u l a t i o n on changes i n exchange r a t e s . Furthermore, by i t s n a t u r e t h e agreement does n o t extend t o r e p a t r i a t i o n of c a p i t a l by Swiss r e s i d e n t s . In f a c t , such r e p a t r i a t i o n has accounted f o r OFFICIAL USE ONLY DECONTROLLED AFTER S I X MONTHS OFFICIAL USE ONLY - 2 ~ much of the c a p i t a l i n f l o w i n t h e p a s t two y e a r s (more than f?0 p e r c e n t i n 1961 s a c c o r d i n g t o Swiss a u t h o r i t i e s ) <> Some i d e a of t h e p o t e n t i a l f o r r e p a t r i a t i o n i s given by a r e v e a l i n g r e c e n t study„ Dr„ Max Bcle, G e n e r a l Manager of the Swiss N a t i o n a l Bank, has e s t i m a t e d t h a t a t the end of I960 S w i t z e r l a n d had a s s e t s abroad of some SSgSUO m i l l i o n o Of t h i s t o t a l 9 r o u g h l y $5,700 m i l l i o n c o n s i s t e d of p r i v a t e s h o r t - t e r m claims and f o r e i g n s e c u r i t i e s i n Swiss p r i v a t e ownership, a s s e t s which a r e s u s c e p t i b l e t o sudden r e p a t r i a t i o n , . The survey a l s o shows t h a t , t h r o u g h t h e y e a r s ending with 1960 9 S w i t z e r l a n d was a l a r g e n e t c a p i t a l e x p o r t e r o Her l i a b i l i t i e s t o f o r e i g n e r s a t t h e end ofT/1960 were p l a c e d a t SU s 070 m i l l i o n , , l e a v i n g n e t f o r e i g n a s s e t s of $ U , 7 7 0 D r „ H e l l ' s t a b l e of f o r e i g n a s s e t s and l i a b i l i t i e s i s reproduced below ( i n m i l l i o n s of U0S0 dollars)0 ' Aggets Short-term claims Private Public Long-term c l a i m s Bond l o a n s and i n d i r e c t c a p i t a l e x p o r t State credits Holdings of f o r e i g n s e c u r i t i e s Private investors Investment t r u s t s Direct investments. P r i v a t e h o l d i n g s of r e a l • e s t a t e and mortgages Total 1,810 280 2,090 900 270 1,160 2,#0 b70 3,020 2,260 p r o memoria 8,8U0 Liabilities S h o r t - t e r m bank l i a b i l i t i e s F o r e i g n p a r t i c i p a t i o n i n Swiss f o r e i g n l o a n s Swiss s e c u r i t i e s i n f o r e i g n ownership Direct investments R e a l e s t a t e and mortgages Total 1,630 230 1,160 3^0 700 4,070 A l l s h o r t - t e r m claims on f o r e i g n e r s t o t a l e d $2,090 m i l l i o n „ Of t h i s amount,, $280 m i l l i o n was p u b l i c l y h e l d , i n c l u d i n g $11*0 m i l l i o n by t h e Swiss N a t i o n a l Bank and $81i m i l l i o n by t h e S t a t e 0 P r i v a t e s h o r t - t e r m c l a i m s on f o r e i g n e r s came t o $1,810 m i l l i o n 0 Swiss b u s i n e s s f i r m s r e g u l a r l y h o l d f o r e i g n b a l a n c e s , b u t most of t h e p r i v a t e c l a i m s r e p r e s e n t r e i n v e s t m e n t a b r o a d , mainly i n d e p o s i t form, of foreign-owned f u n d s p l a c e d with Swiss commercial banks„ Tlie commercial banks 1 s h o r t - t e r m l i a b i l i t i e s t o f o r e i g n e r s were p u t a t $1,630 m i l l i o n a t t h e end of I 9 6 0 , a l a r g e p a r t being payable i n U«,Se d o l l a r s or o t h e r foreign currencies0 l 7 The prec-iseness of the"se~figures i s s p u r i o u s „ They r e s u l t from t h e c o n v e r s i o n i n t o U0S0 d o l l a r s of t h e more-rounded Swiss f r a n c f i g u r e s e s t i m a t e d by D r . I k l e , OFFICIAL USE ONLY OFFICIAL USE ONLY - 3 - I n d i v i d u a l s and investment t r u s t s i n S witzer land h e l d $3*020 m i l l i o n of f o r e i g n s e c u r i t i e s , of which about h a l f were b e l i e v e d t o be Americano This e s t i m a t e i s c o n s e r v a t i v e , and D r , Dele t h i n k s the t r u e f i g u r e might be a s high a s $3,700 m i l l i o n . These h o l d i n g s do n o t i n c l u d e $900 m i l l i o n of what D r , I k l £ c a l l s "bond loans and i n d i r e c t c a p i t a l e x p o r t s , " The "bond l o a n s " seemingly r e f e r t o f o r e i g n bond i s s u e s f l o a t e d on t h e Swiss market and taken up by Swiss i n v e s t o r s * " I n d i r e c t c a p i t a l e x p o r t s " appear t o i n c l u d e r e i n v e s t m e n t abroad of $163 m i l l i o n d e p o s i t e d w i t h t h e BIS by Swiss banks and t h e Swiss Government. On the l i a b i l i t i e s s i d e of t h e p o r t f o l i o account, f o r e i g n e r s owned $1,160 m i l l i o n of Swiss s e c u r i t i e s i n a d d i t i o n t o $230 m i l l i o n of f o r e i g n p a r t i c i p a t i o n i n Swiss f o r e i g n l o a n s , Swiss d i r e c t investment abroad valued a t $2,560 m i l l i o n f a r exceeded t h e $350 m i l l i o n of f o r e i g n d i r e c t investment i n S w i t z e r l a n d , However, the l a t t e r f i g u r e does not i n c l u d e f o r e i g n ownership of Swiss r e a l e s t a t e , T h i s , and f o r e i g n - h e l d mortgages, were p u t a t $700 m i l l i o n * D r , I k l 6 ' s survey i s completed w i t h the i n c l u s i o n , on t h e a s s e t s s i d e , of $270 m i l l i o n of Swiss Government long-term c r e d i t s t o foreigners® Money market, The s h o r t - t e r m money market experienced no fundamental c h a i s e s i n August and e a r l y September, and c o n d i t i o n s remained e s s e n t i a l l y as t h e y had been a t the end of July* This quiescence—which c o n t r a s t e d s h a r p l y w i t h the p e r t u r b a t i o n s of the p r e v i o u s two months—grew out of the ending of the s p e c u l a t i v e inward c a p i t a l f l o w s and consequent o f f i c i a l r e s e r v e a c c r u a l s » The i n c r e a s e d l i q u i d i t y provided by t h e J u n e - J u l y c a p i t a l i n f l o w s put some downward p r e s s u r e on r a t e s ; between August 7 and August 15 the l a r g e Zurich banks reduced 3-month d e p o s i t r a t e s t o 2=l/U-=l/2 p e r c e n t from t h e 2 - 1 / 2 per c e n t which had p r e v a i l e d s i n c e mid-May, (See Table and Chart ) These r a t e s r e p o r t e d l y dipped f u r t h e r i n l a t e August, but i n raid-September were a g a i n r e p o r t e d a t 2-1/%—1/2 p e r c e n t . Bond marketo The weakening of Government bond y i e l d s , begun i n l a t e J u l y , continued during August and i n t o September, The i n c r e a s i n g demand f o r F e d e r a l o b l i g a t i o n s i s b e l i e v e d t o stem from reinvestment i n Switzerland of Swiss-owned f u n d s which had been withdrawn from f o r e i g n c o u n t r i e s i n J u n e - J u l y , The y i e l d t o m a t u r i t y on t h e 3 p e r cent Swiss Confederation bond of 1967-71; d e c l i n e d from 3,19 per cent on J u l y 27 t o 3„lU p e r c e n t on August 31, and was t r a d e d t o y i e l d 3 . 1 1 per cent on September lU, (See Table and Chart 6 , ) Yields on medium-term d e p o s i t c e r t i f i c a t e s were unchanged, i n t h e f i r s t h a l f of August (see T a b l e ) , but were r e p o r t e d t o have r i s e n a f t e r t h e middle of t h e month as some banks shortened the m a t u r i t i e s on new i s s u e s of c e r t i f i c a t e s . This c o n t i n u e s an upward trend i n y i e l d s on t h e s e i n s t r u m e n t s . At p r e s e n t , y i e l d s a r e being s u b j e c t e d t o upward p r e s s u r e by an u n u s u a l l y l a r g e amount of c e r t i f i c a t e s coming t o maturity* OFFICIAL USE ONLY OFFICIAL USE ONLY - li - Stock market 0 The s t o c k exchanges "took a v a c a t i o n " i n August a f t e r a period of f i v e months of h e c t i c b u s i n e s s during which p r i c e s f e l l UO p e r c e n t from March 9 t o June 15 and r o s e 17 per cent from then t o J u l y 27. P r i c e changes were narrow and t r a d i n g was v e r y q u i e t throughout August and during the f i r s t week of September« The Swiss National Bank i n d u s t r i a l s t o c k index showed a r i s e of 2 per cent between J u l y 27 and September 7® (1958 - 100) 1961 - December 29 279.0 1962 - March June 292.5 225.2 175.6 2lU„6 206.3 July a/ 9 1 15 13 27 August 3 10 17 2k 31 September 7 207.6 206 oU 211.1 210.9 209.5 210 «.U Swiss N a t i o n a l Bank index of U2 i n d u s t r i a l s t o c k s . New i s s u e s o F l o t a t i o n s of new s e c u r i t i e s were a t a lew l e v e l i n J u l y , new money r a i s e d amounting t o only $7,2 m i l l i o n g r o s s and $ 5 . 0 m i l l i o n n e t of reimbursement So The month=to-month f l u c t u a t i o n s i n new i s s u e volume a r e l a r g e , and the summer months a l s o tend t o be q u i e t o In August new - i s s u e a c t i v i t y remained a t a reduced l e v e l u n t i l l a t e i n t h e month, when the f i r s t i s s u e s of the new season were e n t h u s i a s t i c a l l y taken u p . In August, A l b e r t E . Reed and Co 0 , L t d . of Great B r i t a i n , paper m a n u f a c t u r e r s , r a i s e d $11o6 m i l l i o n on t h e Swiss market with t h e f l o t a t i o n a t p a r of If)-year bonds b e a r i n g a l u 5 p e r cent coupon 0 The loan was o v e r s u b s c r i b e d , The Swiss National Bank has so f a r approved only $23.2 m i l l i o n of o t h e r f o r e i g n borrowings f o r t h e remainder of t h i s y e a r ; t h e s e borrowers a r e understood t o be the Thyssen Huette group i n Germany, and a French f i r m . Foreign Borrowings i n July-August Anglo-American Corp. of South A f r i c a , L t d . a / A l b e r t E . Reed & C o . , " L t d . (London) a/ Amount ($ m i l . ) Term Coupon rate Issue Price Yield t o maturity 11.6 1968=71 5.0 100 5.0 11.6 1972-77 Uo5 100 tu5 Conversion l o a n . OFFICIAL USE ONLY OFFICIAL USE ONLY - 5 - Balance of payments, Switzerland incurred a c u r r e n t - a c c o u n t b a l a n c e of-payments d e f i c i t i n 1961 of $213 million,. This c o n t r a s t s with the $95 m i l l i o n s u r p l u s r e g i s t e r e d i n I960, and a l s o exceeds the 1961 d e f i c i t e s t i m a t e of about $150 m i l l i o n made by the Neue Zuercher Zeitung s e v e r a l months ago® The major cause of the change i n 1961 was t h e g r e a t e r r i s e i n imports (21 per cent) than i n exports (8<>5 per c e n t ) and the r e s u l t a n t widening of the t r a d e gap from $353 m i l l i o n t o $656 million» S u r p r i s i n g l y , (and c o n t r a r y t o the e a r l i e r Neue Zuercher Zeitung e s t i m a t e ) , the surplus on c u r r e n t i n v i s i b l e s i n creased only $U m i l l i o n to $U52 m i l l i o n 0 While the gross and n e t r e c e i p t s from tourism, investment income, t r a n s p o r t a t i o n , i n s u r a n c e , and the t r a n s i t t r a d e were a l l higher than i n i 9 6 0 , expenditures under t h e "miscellaneous s e r v i c e s " heading rose more than r e c e i p t s , and widened the d e f i c i t on t h a t e n t r y . In a d d i t i o n t o t h e current-account d e f i c i t of $213 m i l l i o n , other outpayments from Switzerland i n 1961 included $210 m i l l i o n of n e t new money r a i s e d by f o r e i g n bond i s s u e s on the Swiss market| loans by the Swiss Government of $50 m i l l i o n t o the United Kingdom and $11.6 m i l l i o n t o the IBRD5 and s h o r t - t e r m investments abroad by t h e Swiss Treasury reported a t $60 million® £ / Since the Swiss National Bank's r e s e r v e s increased $U36 m i l l i o n f o r t h e y e a r , other c a p i t a l movements produced a n e t inflow of $980 million„ One-third of t h a t t o t a l entered Switzerland i n the few days following the DM and g u i l d e r revaluationso Swiss o f f i c i a l s b e l i e v e over h a l f of t h e t o t a l c a p i t a l inflow i n 1961 was r e p a t r i a t i o n of Swiss c a p i t a l from abroad„ In the f i r s t h a l f of t h i s y e a r , the t r a d e d e f i c i t ran a t a much higher annual r a t e , amounting t o $UU7 f o r the s i x months« Foreign bond i s s u e s , n e t of reimbursements, came to $55 m i l l i o n , while t h e Swiss Treasury r e p o r t e d l y invested about $ 8 3 m i l l i o n i n f o r e i g n money markets'and loaned a f u r t h e r $11<>6 m i l l i o n t o the IBRD» The above items caused a f o r e i g n exchange d r a i n of $597 million,, The c u r r e n t i n v i s i b l e s s u r p l u s presumably amounted i n January-June t o l e s s than one-half the 1961 f u l l - y e a r f i g u r e , because t h i s period does not cover the July-August peak of the t o u r i s t season, and thereby o f f s e t l e s s than $372 m i l l i o n of t h e d r a i n 0 Swiss National Bank r e s e r v e s , however, f e l l only $53 m i l l i o n i n January - June, i n d i c a t i n g a n e t c a p i t a l i n f l o w on u n i d e n t i f i e d t r a n s a c t i o n s i n excess of $319 million., Nearly one - h a l f of t h i s inflow apparently occurred i n June, when SNB r e s e r v e s , a d j u s t e d f o r Swiss Treasury investment abroad, r o s e $lii2 milliono The i n f l o w continued heavy i n J u l y but abated i n August„ I n t e r n a t i o n a l reserves<> Adjusted f o r s p e c i a l t r a n s a c t i o n s , the gold and f o r e i g n exchange r e s e r v e s of t h e Swiss National Bank declined $2 m i l l i o n i n Augusta This followed a d j u s t e d r e s e r v e gains of $11*2 m i l l i o n i n June and $108 m i l l i o n i n J u l y , The heavy movements out of the d o l l a r i n t o the Swiss f r a n c and gold abated a b r u p t l y a f t e r President Kennedy's remarks about defending the p a r i t y of the d o l l a r on h i s T e l s t a r news conference of J u l y 23„ O f f i c i a l r e s e r v e s a c t u a l l y declined $52 m i l l i o n i n August» However, about $U0 m i l l i o n of t h e decrease r e s u l t e d from f u r t h e r s h o r t - t e r m investments abroad by the Swiss Treasury, In a d d i t i o n , the Federal Reserve System purchased another $10 m i l l i o n of d o l l a r r e s e r v e s of the SNB, with f r a n c s drawn under t h e J u l y 19 r e c i p r o c a l balance swap agreement with the Bank f o r I n t e r n a t i o n a l Settlements, " ? 7 See Table, page 7. "" OFFICIAL USE ONLY OFFICIAL USE ONLY The f i r s t week of September showed a $2 m i l l i o n d e c r e a s e i n SNB r e s e r v e s , Swiss N a t i o n a l Bank Reserves " ($ m i l l i o n s ) Changes Actual Adjusted f o r s p e c i a l transactions a/ Holdings 1961 December 31 1962 - May 31 June 30 July 31 August 15 31 September 7 1961 Year +#8 Gold Jan.-Mar. -151 1962 Apr.-June + 97 July - 17 % - 86 +127 +108 - 2 Foreign Exchange 2,#0 2,W9 2,k09 2,159 2,159 2,159 2,158 198 168 295 229 189 177 176 Total 2,758 2,596 2,705 2,688 2,61*9 2,636 2,631* " a7 Adjusted f o r r e p o r t e d s h o r t - t e r m f o r e i g n investments by t h e Swiss F e d e r a l T r e a s u r y , use of swap f a c i l i t i e s by t h e F e d e r a l Reserve System, and Confederation l o a n s t o t h e United Kingdom and IBRD* Exchange r a t e s . The supply of d o l l a r s on t h e Swiss market was much reduced from the June - J u l y l e v e l s , and t h e s p o t d o l l a r was above i t s de f a c t o lower s u p p o r t l i m i t of SF U.315 throughout August and during t h e f i r s t h a l f of September. Quotations f l u c t u a t e d between SF U.320 and SF L.325 i n August. A f t e r dipping t o SF U.319 on September 11, t h e s p o t d o l l a r r o s e t o SF U-32U on September 18 0 Spot s t e r l i n g weakened s l i g h t l y , f a l l i n g from SF 12,118 on August 3 t o SF 12.103 on September l i t . The discount on t h e 3-month forward d o l l a r i n S w i t z e r l a n d , which had widened markedly i n June and J u l y , narrowed somewhat from 1«06 per c e n t p e r annum on J u l y 27 t o 0.7U per cent on August 10, and was around 0.80 p e r c e n t p e r annum f a r the n e x t f o u r weeks. This d i s c o u n t gave a covered n e t r e t u r n t o Swiss i n v e s t o r s of around 2 per c e n t on 3=month U.S. Treasury b i l l s and 3 p e r c e n t on 3-month E u r o - d o l l a r d e p o s i t s i n London, compared with 2 . 5 per c e n t , or s l i g h t l y l e s s 5 on .3-month d e p o s i t s i n Swiss banks® (See T a b l e . ) In the second week of September, t h e d i s c o u n t widened again t o 1.09 p e r cent p e r annum on t h e l b t h . This reduced covered y i e l d s t o 1.69 p e r c e n t on the U.S. b i l l and 2.82 per c e n t on E u r o - d o l l a r s . The p r i c e of the "Vreneli" gold c o i n r o s e again t o SF 38.25 on August 11, and held t h e r e through t h e 25th„ (See T a b l e . ) E a r l i e r , i t had r i s e n 5»5 p e r cent from late-May t o l a t e - J u l y , reaching SF 38.25 on J u l y 21, and t h e n had dropped back t o SF 37.25 on J u l y 28 as confidence i n t h e d o l l a r s t r e n g t h e n e d . Demand from Germany was a f a c t o r i n t h e renewed p r i c e r i s e of e a r l y August. OFFICIAL USE ONLY OFFICIAL IBB ONLY - 7 - A c o r r e c t i o n . In terms of U.S. c u r r e n c y , t h e p r e s e n t de f a c t o and s t a t u t o r y upper l i m i t s of t h e Swiss f r a n c a g a i n s t t h e d o l l a r on t h e Swiss market (lower l i m i t s of the d o l l a r a g a i n s t t h e f r a n c ) a r e , r e s p e c t i v e l y , 23.175 U.S. c e n t s and 23.283 U.S. c e n t s . I n C a p i t a l Market Developments Abroad No. 73 of August 2U, 1962, p . $ , t h e s e were i n a d v e r t e n t l y s t a t e d t o be 23.00 c e n t s and 22.8676 c e n t s , r e s p e c t i v e l y . The f i g u r e of 22.8676 c e n t s i s t h e p a r v a l u e of the f r a n c , and the f i g u r e of 23#00 c e n t s p e r f r a n c i s a de f a c t o lower l i m i t of t h e f r a n c p r a c t i c e d by t h e Swiss N a t i o n a l Bank i n March and A p r i l of t h i s y e a r . The s t a t u t o r y lower l i m i t of t h e f r a n c i s 22.1*72 c e n t s . Swiss Balance of Payments, 1961 ( M i l l i o n s of d o l l a r s ; Current account Trade balance Invisibles (net) -656 +lif>2 Total -213 C a p i t a l account Net f o r e i g n bond l o a n s on Swiss Market Swiss F e d e r a l Governments Loans t o United Kingdom and IBRD S h o r t - t e r m investment Other c a p i t a l movements ( n e t ) Change i n Swiss N a t i o n a l Bank reserves -210 - $2 - 60 +980 +1*36 Europe and B r i t i s h Commonwealth S e c t i o n . II. Chart Chart Chart Chart Chart Chart Chart Chart Nine Charts on F i n a n c i a l Markets Abroad 1 2 3 k 5> 6 7 8 - I n t e r e s t A r b i t r a g e , 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 Y i e l d s I n d u s t r i a l Stock I n d i c e s Spot Exchange Rates — Major C u r r e n c i e s Against U.S. D o l l a r Chart 9 - 3-month Forward Exchange Rates OFFICIAL USE ONLY Switzerland. % Money Rates a Exchange Rates, and Gold Prices Forward Swiss franc (3-roo.) 1962-June 1 8 15 22 29 July 6 13 20 21 Aug, 3 10 17 2U 31 Sept. 7 1U +0.1L •KJ.lU +0.32 +0.32 +0o^l +0o67 +0.86 +0.95 +1.06 +0.9L +0.7k +0.79 +0.83 +0.7U -HD080 +1.09 US Tr 0 b i l l Net Bill return Z H l d i n SF 2.69 2.65 2.7U 2.7k 2.90 2.93 2.96 2.91 2.88 2.82 2.83 2.83 2.82 2.80 2.79 2.78 Euro-dollar deposit Net London r e t u r n r a t e i n SF 3.72 3.69 3*66 3.66 3.69 3.66 3.9U 3.72 3.9h 3.81 3.78 3.72 3.72 3.81 3.8U 3.91 2.^55 2.51 2 .12 2.L2 2.39 2.26 2.10 1.96 1.82 1.88 2.09 2.0k 1.99 2.06 1.99 1.69 3.S8 3.55 3.3U' 3.3L 3.18 2.99 3.08 2.77 2.88 2.87 3oOU 2.93 2.89 3.07 3oOU 2.82 Swiss bank deposit (3-»o«) 2.50 2.50 2.50 2.50 2.50 2. SO 2.go 2.50 2.50 2.50 2.50 2.38 Exchange rates Spot Spot £ in $ in SF SF u.315 it. 315 u.315 u.315 u. 3 1 5 u.315 u. 3 1 5 u.315 u.321 u.320 u.323 u.321 u.321 u.323 u.322 u.321 12.126 12.118 12.121 12.122 12.118 12.115 12.113 12.117 12.112 12.118 12.121 12.121 12.113 12.113 12.109 12.103 Gold coin a / i n SF n.a. 35.25 36.75 36.75 36.75 36.75 37.75 38.25 37.25 37.75 38.25 38.25 38.25 a / "Vreneli" 2 0 - f r a n c piece (0*1867 t r o y ouncesj $6»53 a t $35 per ounce). Switzerland s Selected Capital Market S t a t i s t i c s C a p i t a l market y i e l d s Deposit c e r t 8 s Long-term 12 can5 govto tonal large bonds banks banks "" ~~~ New'issues (4 m i l l i o n s | monthly a v e . or month) (New money r a i s e d ) Swiss Swiss Fgn. Total bonds stocks bonds Gross Net a / 1962-High Low June 15 Sept a / Net of reimbursementso' Amounts 'by"type are g r o s s . * —— b / The J u l y borrowing was a conversion loan and did not r a i s e new money. INTEREST ARBITRAGE, THREE-MONTH UNITED TREASURY STATES / CANADA BILL R A T E S RATE DIFFERENTIAL A N D CANADIAN FORWARD D DO OL LL LA AR R S P R E A D IN F A V O R O F C A N A D A + RATE DIFFERENTIAL WITH P—-i— — FORWARD r*—r i E EX XC CH HA AN NG GE E r r C CO OV VE ER R ™i NET I N C E N T I V E I N F A V O R O F C A N A D A + \b INTEREST 3-MONTH RATE Y O R K / L O N D O N RATES AND FORWARD DIFFERENTIAL FORWARD NEW BILL TREASURY DIFFERENTIAL " 3 - M O NTH RATE ARBITRAGE, | STERLING WITH EXCHANGE COVER V INTEREST Friday ARBITRAGE 3 - M O NTH . FOR GERMAN COMMERCIAL BANKS figure! EURO p, TREASURY DOLLAR BILLS, DEPOSIT INTERBANK LENDING V RATE RATE DIFFERENTIAL t— r DIFFERENTIAL AND FORWARD DEUTSCHE WITH FORWARD EXCHANGE NET I N C E N T I V E /\x RATE AND RATES IN F A V O R A, MARK COVER OF FRANKFURT ( + ) \ INTERBANK /AiU, TREASURY B I U S Special forward i ivoiloble to Gerrrui LOAN RATE U INTEREST ~ 3 -MO NT ARBITRAGE, H TREASURY INTERBANK — LENDING i - . i FRANKFURT / BILLS AND L O N D O N ' RATES' - m -,- ^ ! \ l\ GERMAN INTERBANK RATE D I F F E R E N T I A L A N D | - 3 - M O N T H FORWARD STERLING 7—r — — — i — r : T RATE DIFFERENTIAL r WITH - GERMAN TREASURY 8 I I I S r FORWARD ' ' i. — T ~ T EXCHANGE COVER GERMAN NET I N C E N T I V E OF U N I T E D K I N G D O M O V E R : fV- TREASURY BILLS Cher, 5 SHORT-TERM INTEREST RATES pV-A m 3-month treasury bill rotes lor all countries except Japon (J month interbank deposit rate) ond Switzerland (3 month deposit rote) 3 month rate lor U S dollar deposits in London LONG-TERM BOND YIELDS INDUSTRIAL STOCK INDICES* 19 5 8 = 1 0 0 Ratio i ca I e SPOT EXCHANGE RATES - MAJOR CURRENCIES AGAINST U.S. DOLLAR p # # ( 3-MONTH FORWARD A G A I N 5T U . S. EXCHANGE RATES 1 GERMAN DOLLAR L MARK PREMIUM + 1 swiss F R A N C ! '0UN0 " 1 'AGAINST AGAINST 1 1 POUND POUND 1 , I STERLING i I STERLING 1960 / X Z STERLING 1 FRENCH ' •\:r* DISCOUNT1 V X - LONDON - LONDON FRANC / ; 1961 I R 1 1 I I I I
@FedFRASER